From Volume 7, Issue 17 of EIR Online, Published Apr. 22, 2008

Global Economic News

City of London Better Watch Its Back

April 13 (EIRNS)—Bankers in the City of London and Wall Street had better start watching their backs, the Financial Times warned in its lead editorial April 12. "This week, the world's leading banks ... concurred with a conclusion reached by the rest of the world: they screwed up, the credit crisis is largely their fault, and everybody else is suffering for their errors. The admission may not be enough to prevent a dangerous backlash," the FT warned. "Bankers may have realized, too late, the dangers of the banker caricature many people now believe."

The paper tries to defend the bankers from the perception that they are crooks who "manufactured toxic derivatives of subprime loans," but warns that too many "ordinary citizens" are questioning what has happened to the entire banking system—which clearly is not working any more. "Politicians have noticed too." Bankers, by proposing some so-called regulatory measures, are trying to avoid further control, but they should be a lot more scared than that, the FT warns. They "will not succeed. The political atmosphere has become too febrile for that: the mob is at the gates baying for justice."

Bankers may be able to "blunt a few pitchforks and snuff out a blazing torch or two" for now, but the problem is much bigger, the City of London mouthpiece admits. Governments, under all the pressure, "face a deeper challenge: to make a principled stand for free markets, appropriately supported. It is not just the credit crisis. Popular fears of globalization, discontent with high oil and food prices, rising income inequality within nations all have contributed to an uncertain time for capitalism. The capitalists have certainly not helped."

British Empire's Macquarie Bank Intensifies Assault on China

April 17 (EIRNS)—Macquarie Bank is spearheading an Australian-based, but British-directed financial assault on China by a complex of Australian banks and insurance companies. Macquarie, the world's leader in corporativist/fascist public-private partnerships (PPPs), has held talks with "key Chinese ministries, regulators and investors about establishing China's first domestic infrastructure fund," reported the April 15 Sydney Morning Herald. Fronting for Macquarie and other British speculators, Mandarin-speaking Australian Prime Minister Kevin Rudd lunched with Chinese executives and regulators in Beijing this week, to push the idea. "One of the core propositions that I am putting to the Chinese government for consideration is to expand the number of Australian funds managers who are able to operate here in the Chinese market," Rudd said.

Macquarie, first established as the British imperial Hill Samuel Bank's Australian subsidiary in 1969, bought the brokerage business of the Anglo-Dutch ING Barings in 2004, and advised the China Railway Construction Corporation in a $5.6 billion Hong Kong and Shanghai stock offering, China's largest float this year and "the second-largest globally," according to the Herald.

The Herald also notes that Macquarie is working with Goldman Sachs and Morgan Stanley to secure a role in "future floats and acquisitions involving some of China's largest companies." Z-Ben Advisors, a Shanghai-based advisory firm, reports that Macquarie et al. are targetting China's three main sovereign wealth funds: the $200 billion China Investment Capital Corporation; the government's main pension fund; and the China-Africa development firm. These three funds are forecast to triple in size by 2010, to $729 billion; the scale of the China-African development firm as one of the three, bespeaks the magnitude of China's positive role in Africa, one which has drawn the wrath of the British Empire as Lyndon LaRouche has emphasized recently. This Australian-based financial warfare against China flows from the use of Australia as the British Empire's stepping stone in Asia, as per recent calls to that effect by British Foreign Secretary David Miliband and Trade and Investment Minister Lord Digby Jones.

China Grain Supply Getting 'Tight'

April 16 (EIRNS)—China has enough grain for the time being, but stabilizing its supplies will get more and more challenging, State Administration of Grains (SAG) director Nie Zhenbang said at an agriculture meeting in Beijing April 14. "We should always keep alert in guaranteeing grain security," Nie was quoted by Xinhua today. China is more and more integrated into the world economy, and changes in the world market are increasingly affecting the domestic situation, Nie said. On top of this, limited arable land, water shortages, and internal transport problems are all affecting grain supply stability, Nie also wrote in a signed commentary for the Peoples Daily. "We now have less room to increase acreage planted with grains, and it is becoming more and more difficult to steadily raise yields," due to shrinking amounts of arable land and water shortages, Nie wrote. "It is increasingly difficult now to keep domestic grain market and price stability." China already has one of the lowest arable land and water ratios per person in the world.

Maize and soybean supplies have tightened, and in some big grain markets, there are even shortages. Cooking oil is a special problem, and China will not be able to change its dependence upon imports, which is now 42% of yearly demand. In January, Nie had told a Beijing agriculture conference that "As consumption grows and shortages spread, grain imports have been increasing. "There is huge pressure to secure the supply of cooking oil and keep prices stable."

Deputy SAG director Zeng Liying also said that pressure on grain prices in China is increasing due to deficient supplies, soaring agricultural product costs and fluctuations on international futures markets. China's grain situation has improved drastically in recent years, Zeng Liying said, with its grain deficit sinking from 50 billion kilos in 2003 to 15 billion now. This year will be difficult, however, due to the worst winter in over 50 years and severe drought in the north.

Nie told the Beijing conference April 14 that uneven stock distribution in producing areas and selling regions is also a problem. The China Economic Observer reported today that important grain-growing regions such as Heilongjiang are badly hampered by lack of sufficient transport and storage facilities for their crops, and this is lowering prices because farmers cannot get their crops to markets.

China's Food Trade Deficit

April 16 (EIRNS)—China's trade in agricultural products has gone from surplus to deficit in the first months of 2008, as the growth rate of imports "dwarfed" the rate of exports, Xinhua quoted a Ministry of Agriculture official today. Beijing began to restrict food exports already late last year, by ending export rebates and then imposing a 5%-25% export duty on 57 agricultural products from January. The measures are taking effect. Overall, China's net food exports fell 84.8% to 295,000 tons this year. Rice exports were up by 56% to 207,000 tons. China produced about 186 million tons of rice this year, several million tons more than is needed, the Chinese Economic Observer reported today—but maize exports were down 96.5% and wheat exports by 17%. Edible oil exports were also down. The agricultural trade deficit was $2.06 billion, a big shift from the $1.15 billion surplus last year. In 2007, China had sharply increased exports of wheat, maize and soybeans. Wheat exports were up 200% until the policy shift in December, the China Daily reported.

China's State Council has made curbing grain exports a top priority, and, in addition to the export duties on grain, will also impose export quotas on wheat, maize, and rice flours. But China had to increase imports of soybeans, a key source of protein and animal feed, by 36% in volume, to 7.8 million tons, but that meant a 140% increase in the cost, as soybean prices have nearly doubled in the past year. China bought about 25% of the US soy crop last year.

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