Summary
Both EU and China have to contend with domestic imperatives at a time when the world economy is still not yet out of the doldrums.
Analysis
Although the global financial and economic crisis has eased, the world is not out of the woods. Many countries are still trying desperately to kick-start their economies, including the use of 'quantitative easing' or printing money. Unemployment remains high in most countries and the unions are getting restless. Notwithstanding countries' public grand-standing against protectionism, we are seeing a surging tide of protectionism in both developed and developing countries. We are likely to see this intensifying before subsiding when the world economy eventually climbs out of recession.
All of these raw materials are critical to China's economic stimulus package, of which over 70% is on infrastructural building projects. As these projects are being pushed at breakneck speed, there is a shortage of such materials at home.
At the same time, China is implementing a strategy to reduce the carbon intensity of her manufacturing output in an attempt to achieve a more sustainable industrial development model (see my presentation at
http://www.andrewleunginternationalconsultants.com/files/chinas-sustainable-industrial-developmentcea-conference-dublin.pdf
Amongst the measures adopted are restrictions on those materials, including those in question, often associated with carbon and energy -intensive industries.
Hence the Chinese official response using the convenient environmental argument.
