Pitfalls and Pipelines - Philippine Indigenous Peoples Links
Pitfalls and Pipelines - Philippine Indigenous Peoples Links Pitfalls and Pipelines - Philippine Indigenous Peoples Links
54 Pitfalls and Pipelines: Indigenous Peoples and Extractive Industries During intervening years, Chinese state-owned enterprises—backed by state banks and sovereign wealth funds, along with private firms—also invested substantially in foreign mining projects. They made important corporate acquisitions—notably in Australia, Peru and Canada. 33 Underpinning these moves was the regime’s core aim of building-up its raw mineral stocks. The state was taking advantage of low costs of acquisition, in order to bulwark domestic requirements, and in anticipation of future rises in domestic demand. It was a strategy with marked limitations. Financial Times analyst, William MacNamara, warned in 2010 that mining companies have a specific “problem,” relating to the tendency of state fiscal managers to “restock” materials at the start of an expected new economic cycle. According to MacNamara, this could lead to their buildingup supplies well beyond their country’s existing requirements. During 2009, he said, such restocking was especially evident in China, with the result that its “stimulus-boosted manufacturing helped carry metals prices around the world.” 34 Apparently heeding this warning, by early 2010 China began reining in such spending. Meanwhile, according to MacNamara, there was also “little evidence that restocking is happening in developed countries in the way it once did.” 35 Deutsche Bank analyst, Daniel Brebner, seemed to agree, conjecturing that product manufacturers in general were “holding lower stock levels permanently to avoid being caught out as they were in 2008.” Brebner predicted that “...the inventory cycle in the western world will be a shadow of its former self.” 36 This is, however, only part of the story. China acquired full membership of the World Trade Organization (WTO) in 2001, prompting an unprecedented flurry of overseas trade in its finished and semi-finished goods. As a consequence, the treasury accumulated an unsustainably high level of dollardenominated funds. Some analysts have suggested that this risky dependency has recently driven Beijing’s autocracy to promote a shift away from the “Mighty Dollar” to IMF Special
Chapter 1.2: Financial Innovations and the Extractive Industries 55 Drawing Rights, back to the gold standard, or even towards promoting a new form of international exchangeable currency based on trading of commodities. If that’s true, it helps explain why, during 2010 and much of 2011, the state created those huge stocks of raw materials it clearly did not require for short-term use. It also adds weight to the argument that we won’t see similar excessive accretion of minerals by China for a long time to come—if ever again. 37 Of equal, if not deeper, concern to the regime is that many Chinese citizens have been spending at levels never seen before, while the vast majority of them have no means or incentive to save. Meanwhile, investment in socially productive sectors at home—such as agriculture and human services— has been dramatically drying up. For these reasons, the Chinese administration has been assiduously seeking to “de-pressure” the state economy—part of which has involved measures to reduce consumption of coal, shut down numerous small, dangerous coal pits, and “consolidate” steel foundries, in order to cut operating costs, and reduce pollution. Until recently, these measures have failed to substantially reduce overall domestic demand for mined materials or what they are turned into. On the contrary, China’s “rising” middle classes continue demanding more and better housing, and access to consumer items. Nonetheless, the regime has started to limit exports of finished products—notably to Europe and the USA—in order to balance its huge trading deficits. (To an extent this was already happening, thanks to reductions in demand for Chinese processed and manufactured export goods, occasioned by economic crises in importing countries.) Then, in the first months of 2011, it became clear that the regime was also determined to stem the importation of some metals and coal. In March 2012, the world’s third biggest iron ore exporter, BHP Billiton, warned that Chinese demand for iron ore was “likely to flatten out.” At the same time, a Barclays Capital economist judged that China had now become “the least supportive factor for copper prices.” 38
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54 <strong>Pitfalls</strong> <strong>and</strong> <strong>Pipelines</strong>: <strong>Indigenous</strong> <strong>Peoples</strong> <strong>and</strong> Extractive Industries<br />
During intervening years, Chinese state-owned enterprises—backed<br />
by state banks <strong>and</strong> sovereign wealth funds,<br />
along with private firms—also invested substantially in foreign<br />
mining projects. They made important corporate acquisitions—notably<br />
in Australia, Peru <strong>and</strong> Canada. 33<br />
Underpinning these moves was the regime’s core aim of<br />
building-up its raw mineral stocks. The state was taking advantage<br />
of low costs of acquisition, in order to bulwark domestic<br />
requirements, <strong>and</strong> in anticipation of future rises in domestic<br />
dem<strong>and</strong>.<br />
It was a strategy with marked limitations. Financial Times<br />
analyst, William MacNamara, warned in 2010 that mining<br />
companies have a specific “problem,” relating to the tendency<br />
of state fiscal managers to “restock” materials at the start of an<br />
expected new economic cycle.<br />
According to MacNamara, this could lead to their buildingup<br />
supplies well beyond their country’s existing requirements.<br />
During 2009, he said, such restocking was especially evident<br />
in China, with the result that its “stimulus-boosted manufacturing<br />
helped carry metals prices around the world.” 34<br />
Apparently heeding this warning, by early 2010 China<br />
began reining in such spending. Meanwhile, according to<br />
MacNamara, there was also “little evidence that restocking is<br />
happening in developed countries in the way it once did.” 35<br />
Deutsche Bank analyst, Daniel Brebner, seemed to agree,<br />
conjecturing that product manufacturers in general were<br />
“holding lower stock levels permanently to avoid being caught<br />
out as they were in 2008.” Brebner predicted that “...the<br />
inventory cycle in the western world will be a shadow of its<br />
former self.” 36<br />
This is, however, only part of the story. China acquired<br />
full membership of the World Trade Organization (WTO) in<br />
2001, prompting an unprecedented flurry of overseas trade<br />
in its finished <strong>and</strong> semi-finished goods. As a consequence, the<br />
treasury accumulated an unsustainably high level of dollardenominated<br />
funds. Some analysts have suggested that this<br />
risky dependency has recently driven Beijing’s autocracy to<br />
promote a shift away from the “Mighty Dollar” to IMF Special
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