Geopolitical, currency and trade wars worth taking note of

There is a lot going on in terms of geopolitical, trade and currency risk at the moment that are worth keeping an eye on.

• HA commentary: The Chinese have reportedly stopped exporting rare earth oxides to Japan, a resource of which China controls 97% of the global supply, a resource which is used in high-tech equipment such as smartphones, laser devices and military equipment.  According to analysts it may take up to 15 years or so to get production up and running in the rest of the world should China decide to keep it all to themselves.  South Africa in the 1950s produced large amounts of rare earth metals.  There are feasibility studies going on in the Western Cape on certain sites to establish whether there is anything worth mining.  Should something of value be found there, this may see significant prospecting in SA going forward, investment inflows and job creation.

China Hold on Metals Worries Washington

By NATHAN HODGE And JAMES T. AREDDY

WASHINGTON—China’s control of a key minerals market has U.S. military thinkers and policy makers alike worried about access to materials that are essential for 21st-century technology like smartphones—and smart bombs.

The concern over supplies of so-called rare-earth elements was highlighted this week by a report that Chinese customs officials had blocked exports of the materials to Japan. On Thursday, Beijing denied those reports. “China doesn’t block rare-earth exports to Japan,” said Chen Rongkai, a spokesman for China’s Ministry of Commerce.

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• HA commentary: The captain of a Chinese fishing trawler is being detained by Japanese officials after his boat collided with Japanese vessels.  Jim Sinclair reckons this is a function of the fight over control of the South China Sea and the vast oil and gas resources to be found there.

Japan seeks damages as China trawler row lingers

(Reuters) – Japan said it will ask China to pay for damage to its patrol boats suffered in a collision with a Chinese trawler, as Asia’s top two economies continue to bicker over the affair.

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• HA commentary: The American House Ways and Means Committee on Friday voted to have the “Currency Reform for Fair Trade Act” go for a vote on Wednesday in the House of Representatives.  The Chinese continue to argue that it is not their fault for the widening US trade deficit, but that the Americans must cut back on consumption to have this deficit reduced.  They argue the US runs a deficit with the rest of the world that must be addressed, not only with China.  In reponse, although small, China increased its import tariff on US imports of chicken.

Risk of trade war rises as key US committee backs tariffs on China

The risk of a trade war between the US and China has increased after a key Congressional committee backed a bill to allow US companies to seek tariffs on Chinese imports.

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China raises antidumping duties on U.S. chicken

HONG KONG (MarketWatch) — China’s Commerce Ministry has decided to increase an antidumping duty on U.S. chicken products, months after the punitive measures were first introduced, in a sign of continuing trade frictions between the two economic superpowers.

China will raise the minimum chicken duty to 50.3% on chicken products imported from the U.S., compared with minimum duties of 43.1% that were introduced in February, the ministry reportedly said in a statement on Sunday. The maximum antidumping tariff for the chicken products will remain at 105.4%, reports said.

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• HA commentary: The biggest holder of US Treasuries, China, has been told by the US SEC that its rating agency is not considered an official one in the US.  Dagong gives the US a AA rating, not AAA as the big three agencies afford the US.  The US will soon find out that it is unwise to continuously bash your banker.

Dagong fires back at SEC

By JOY C. SHAW

SHANGHAI—Dagong Global Credit Rating Co. said the U.S. Securities and Exchange Commission was discriminatory in its denial of the Chinese rating company’s application to be an officially recognized bond rater in the U.S., and said it is considering legal action against the agency.

The SEC said last week that Dagong’s proposal to have China’s securities regulator vet and broker all correspondence between the SEC and Dagong wouldn’t satisfy U.S. federal securities law.

Dagong, in a harshly worded statement posted on its website Sunday, said the SEC was wrong to deny its application because of the commission’s inability to conduct cross-border supervision over Dagong, a touchy issue involving national sovereignty.

“Dagong cannot accept giving up national sovereignty as a condition for a credit-rating company’s qualification,” the firm said.

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• HA commentary: Lastly, a computer malware virus called Stuxnet, which has been developed by either the US or Israeli military (according to some security experts), has attacked the Iranian Bushehr nuclear plant, amongst other Iranian industrial processes.