This is a brief peek under the skirts of the reason behind President Obama’s China trip. The gassy TV pundits have all pontificated as to why Obama decided to schedule his Asia tour at this time. Of course they all zeroed in on the trillion dollar debt that China is holding and most decided that Obama had to go and personally assure the Chinese that the treasuries that they are holding are still a solid investment. Some even speculated that the Chinese were concerned about the upcoming Health Reform legislation and its financial impact on the American Treasury. All of this is pure bull and I will explain why.
While many Americans are aware that the Chinese have financed our government’s debt to the tune of a trillion dollars. However, I doubt many Americans are aware that China is the world’s exclusive supplier of precious minerals that are needed industrially across the globe. These commodities are Lithium for batteries and rare earth metals cerium, thulium and samarium which are used to make magnets for motors. Several recent actions by China have caused great concern in Washington. First, China has signed a “Super Asia” contract with Toyota of Japan to supply both Lithium and rare earth metals for the projected expanded sale of the Toyota Prius hybred automobile throughout Asia. (Lithium for the batteries and Rare earth metals for the magnets used in the electric motor of the Prius.) The second issue is that China has decided to reserve a significant portion of these commodities for its own future manufacturing needs, thereby removing a significant supply from the current world marketplace.
The Pentagon accordingly has recently started reviewing its future equipment needs in terms of deciding its dependence on Chinese supplies. All of this is the real reason why the President needed to make this trip, without giving the appearance of urgency. I should also point out that these rare earth magnets are a key component of computer disk drives, so just imagine how the cost of computers would skyrocket if China reduced the supply of these metals available to manufacturers around the world. Just imagine….. Forget the trillion dollars, this is the real problem facing America.