Email of the day (1)
"I'm a subscriber and a public health physician and today I ran across an article in Medscape that has relevance to the article in today's commentary on China's shutting down 90% of it lead-acid manufacturing.
"Thanks to you and David for a wonderful educational service."
Eoin Treacy's view Thank
you for this interesting article focusing on the public health and agriculture
implications of China's lead smelting industry. The 10% estimate of heavy metal
polluted farm land is alarming for a country such as China with a limited amount
of arable land, a large population and rising per capita calorie consumption.
Depending
on how successful China is in shuttering the lead smelting industry, other countries
may move to avail of the opportunity. This would necessitate a preference for
economic growth over environmental concerns, which has long been unpalatable
in many more developed countries. China's announcement that it wants to exit
the sector confirms it has reached a point where it has more to gain from preserving
the environment than from destroying it.
An important
IMF paper
by Steve Barnett and Ray Brooks dated January 2010 suggests:
"A
1 yuan increase in government health spending was associated with a 2 yuan increase
in household consumption. Total (household plus government) consumption could
thus increase by as much as 3 yuan depending on the extent that government health
spending takes the form of consumption instead of transfers."
Viewed
in this light, China's incentive to reform its attitude to polluting industries
is primarily of what offers the most economic benefit. China is working towards
migrating its economy to higher margin, more technologically advanced sectors.
It will therefore need to rely less on inefficient, highly polluting industry
which will increasingly be viewed as a liability rather than an advantage.
A concurrent
aim is to grow the consumer economy in an effort to counterbalance the export
sector which is reliant on the global market. One of the main impediments to
a more dynamic consumer sector is the need to save for future healthcare costs.
Many people have elderly parents and just about everyone Mrs. Treacy and I know
in China is worried about their children's health. Air pollution is a particular
concern but so is food contamination. Heavy metal poisoning is more isolated
to rural areas. Nevertheless, a vibrant consumer economy is based on confidence.
China needs to continue to work towards improving its environmental record if
it is to achieve its long-term developmental goals.
An additional consideration from a markets perspective is that if 10% of China's
agricultural land is polluted with heavy metals, it will need to get its food
from somewhere. Meat, particularly beef, is a sector where China is unlikely
to ever be self sufficient. Live
Cattle and Feeder
Cattle continue to extend their breakouts from multi-year ranges. China
has one of the largest pig industries in the world but has nevertheless had
to combat rampant price inflation. Lean
Hogs found support in the region of the upper side of its 5-year range and
have bounced.