Michael Pascoe writes:


The Smage‘s multi-by-lined scoop on China breaking the WTO rules to hold down iron prices is a nice yarn that
shows life is getting harder for the three big iron ore miners – BHP, Rio and CVRD.

Without anything illegal such as a “cartel”, the surge in demand for iron ore has allowed the big three to hang
together very nicely on pricing – not that they in any way hang together, of
course.

But today’s story of Beijing laying down the maximum
price anyone in China is allowed to pay for iron ore should not come as a surprise. For
all the rhetoric, China essentially remains a command economy. The cadres still run it – and that’s what
makes the National People’s Congress presently underway an important exercise
for Australia’s economy.

What’s happening in Beijing is the adoption of a
five-year plan that will seek to cool China’s
raging thirst for raw materials. By starting to take pollution and efficiency
just a little bit seriously and re-weighting economic priorities, Beijing intends to
slow growth in demand or raw materials to something more manageable.

The message coming from China
watchers such as Citigroup’s Yiping Huang is
that China will succeed in encouraging more consumer spending as a proportion
of its economic growth and ease up on heavy industry as a growth engine. That is just what the world wants to hear.
It makes the China story more sustainable, but caps the outlook for raw materials.

In the meantime, the communist dictatorship
is still rounding up would-be protesters, according to Amnesty International to avoid NPC embarrassments. Maybe it’s also a trial event for the 2008
Olympics.

Peter Fray

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