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Pitfalls and Pipelines - Philippine Indigenous Peoples Links

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Chapter 1.2: Financial Innovations <strong>and</strong> the Extractive Industries<br />

55<br />

Drawing Rights, back to the gold st<strong>and</strong>ard, or even towards<br />

promoting a new form of international exchangeable currency<br />

based on trading of commodities.<br />

If that’s true, it helps explain why, during 2010 <strong>and</strong> much<br />

of 2011, the state created those huge stocks of raw materials it<br />

clearly did not require for short-term use. It also adds weight<br />

to the argument that we won’t see similar excessive accretion<br />

of minerals by China for a long time to come—if ever again. 37<br />

Of equal, if not deeper, concern to the regime is that many<br />

Chinese citizens have been spending at levels never seen<br />

before, while the vast majority of them have no means or incentive<br />

to save. Meanwhile, investment in socially productive<br />

sectors at home—such as agriculture <strong>and</strong> human services—<br />

has been dramatically drying up.<br />

For these reasons, the Chinese administration has been assiduously<br />

seeking to “de-pressure” the state economy—part of<br />

which has involved measures to reduce consumption of coal,<br />

shut down numerous small, dangerous coal pits, <strong>and</strong> “consolidate”<br />

steel foundries, in order to cut operating costs, <strong>and</strong><br />

reduce pollution.<br />

Until recently, these measures have failed to substantially<br />

reduce overall domestic dem<strong>and</strong> for mined materials or what<br />

they are turned into. On the contrary, China’s “rising” middle<br />

classes continue dem<strong>and</strong>ing more <strong>and</strong> better housing, <strong>and</strong><br />

access to consumer items. Nonetheless, the regime has started<br />

to limit exports of finished products—notably to Europe <strong>and</strong><br />

the USA—in order to balance its huge trading deficits. (To<br />

an extent this was already happening, thanks to reductions<br />

in dem<strong>and</strong> for Chinese processed <strong>and</strong> manufactured export<br />

goods, occasioned by economic crises in importing countries.)<br />

Then, in the first months of 2011, it became clear that the<br />

regime was also determined to stem the importation of some<br />

metals <strong>and</strong> coal. In March 2012, the world’s third biggest iron<br />

ore exporter, BHP Billiton, warned that Chinese dem<strong>and</strong> for<br />

iron ore was “likely to flatten out.” At the same time, a Barclays<br />

Capital economist judged that China had now become “the<br />

least supportive factor for copper prices.” 38

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