This week’s big REE stories will likely come out of the PDAC gathering in Toronto, but I will leave that coverage to those actually there. Today my attention is on China and a big development that took place this morning UK time. For the second time in the first three months of 2012 China’s signalling their intention to promote growth in the domestic economy over that of the export economy. Is China really about to adjust its export led economy in favour of a more G-7 style consumption economy? If so, what does that mean for commodities prices and more importantly China’s internal REE demand? If all the world consumed like Americans, it’s estimated that we would need 3 planet earths. But that is just to cover today’s 6 billion humans. We are headed for a planet of 9 billion by about 2050.
In a largely command economy like China’s, any switch in favour of consumption will happen far faster than in a free market system, as in the west. When the top signals a change of emphasis, in an economy like China’s there’s no debate, everyone gets on with the job of meeting the new policy targets. Back in January China signalled it was going to accelerate the pace of domestic growth, today’s speech re-empathised that, and even allowed for the inflation rate to remain at 4%.
China Cuts GDP Target to 7.5% as Exports Slow
By Bloomberg News – Mar 5, 2012 5:24 AM GMT
China pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005, a signal that leaders are determined to reduce reliance on exports and capital spending in favor of consumption.
Officials will also aim for inflation of about 4 percent this year, unchanged from the 2011 goal, according to a state- of-the-nation speech that Premier Wen Jiabao delivered to about 3,000 lawmakers at the annual meeting of the National People’s Congress in Beijing today.
Asian stocks fell as Wen, 69, said the nation needs to shift to a more sustainable and efficient economic model and achieve “higher-quality development over a longer period of time.” China must boost the incomes of ordinary people, count less on exports and investment and reduce the state’s role in favor of private enterprise, Zong Qinghou, the country’s second- richest man, said in a March 3 interview.
The gross domestic product target should be read as the lower bound of the government’s “comfort zone,” said Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs Group Inc. in Hong Kong. “It can also be viewed as a gesture from the central government that local governments should not focus solely” on the pace of expansion.
Wen reiterated that the government will maintain a “proactive” fiscal policy and a “prudent” monetary policy. The government in February lowered banks’ reserve requirements for the second time in three months to boost lending and sustain growth, following five interest-rate increases from October 2010 to July 2011 aimed at slowing inflation.
Improving the quality of life, is one of the main aims of the current 5 year plan. Remediating past industrial excess, and environmental damage, switching to greener energy and more efficient energy usage. Controlling and reversing the massive air pollution problems plaguing most of China’s giant cities. China’s REEs for use in China? Indifference if Japanese and South Korean buyers stay away? An accelerated push into electric public transport?