RI H2 ECON P1

9732/01/Prelim/Yr6/11 © RI 2011 [Turn over RAFFLES INSTITUTION 2011 YEAR 6 PRELIMINARY EXAMINATION Higher 2 ECONOMICS 9732/01 Paper 1 Case Studies 1 September 2011 2 hours 15 minutes Additional Materials: Answer Paper READ THESE INSTRUCTIONS FIRST Write your name, index number and CT class on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for diagrams, graphs or rough working. Do not use paper clips, highlighters, glue or correction fluid. Answer all questions. The number of marks is given in brackets [ ] at the end of each part question. Begin answering each question on a fresh sheet of answer paper. At the end of the examination, fasten your answer to each question separately. Attach this cover sheet to your answer for Question 1. Cover Sheet This document consists of 9 printed pages and 3 blank pages. Question No. Marks 1 /30 H Raffles Institution Nurturing the Thinker, Leader & Pioneer Name : ________________________ Civics Class : ________________________ Economics Tutor : ________________________

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9732/01/Prelim/Yr6/11 3 © RI 2011 [Turn over RAFFLES INSTITUTION 2011 YEAR 6 PRELIMINARY EXAMINATION Higher 2 ECONOMICS 9732/01 Paper 1 Case Studies 1 September 2011 2 hours 15 minutes Additional Materials: Answer Paper Attach this cover sheet to your answer for Question 2. Cover Sheet Name : ________________________ Civics Class : ________________________ Economics Tutor : ________________________ Question No. Marks 2 /30 H Raffles Institution Nurturing the Thinker, Leader & Pioneer

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9732/01/Prelim/Yr6/11 5 © RI 2011 [Turn over Answer all questions. Question 1 Rare Earths Extract 1: China controls rare earth supplies With over 90% of the global Rare Earth resource held by Chinese companies, the country’s monopoly looks unchallenged. The recent acquisition of stakes in Australian rare earth miners Lynas Corporation and Arafura Resources has brought China’s control of the majority of the rare earth deposits outside China. Rare Earth metals are needed for the manufacturing of wind turbines, solar panels, plasma televisions, mobile phones and hybrid car batteries meaning the Chinese monopoly could shift the high-tech manufacturing industry bases from Japan and Korea to China. Acquisitions of the Australian Rare Earth mines are strongly backed by the Chinese Government. Privately-owned Japanese companies are at a disadvantage when competing with state-owned Chinese companies. The Chinese have easy access to government capital while the risk assessment for a Japanese company can take much longer. Acquisition financing can be raised through state- owned banks, guaranteed by the Government. Additionally, the Chinese government , in its determination to increase rare earth resources, is also less risk averse. Although China is home to the largest rare earth reserves in the world, it is still actively seeking chances to acquire overseas mines. The purpose is to assure resources for the green energy and high-tech industries. Source: www.mergermarket.com, 29 May 2009 Extract 2: Never enough rare earths for all Global demand for rare earth metals has more than doubled over the past decade, as ever more devices make use of their unique properties. Production of both hybrids cars and wind turbines is expected to climb sharply amid the clamour for cleaner transportation and energy alternatives that reduce dependence on fossil fuels blamed for global climate change. Japan is the world’s biggest importer of the metals. The car giant Toyota plans to step up its sales of its Prius hybrid automobile to 1 million units pe r year starting in 2010. With several kilograms of rare earth metals in each hybrid car, the Prius, is the biggest user of rare earths of any object in the world. Currently, Toyota has 70 percent of the U.S. market for vehicles powered by a combination of an internal -combustion engine and electric motor. The Prius is its No. 1 hybrid seller. The problem is that not only does China dominate the production of rare earths, it also leads the field in extraction. For example, when Japan buys rare earth mineral s from countries other than China, it still has to pay Chinese factories to extract the pure metal because most of the technology for refinement is only found in China. Over the last seven years, China has reduced the amount of rare earths available for export by some 40%. Beijing has maintained that the export cuts are in line with sustainable development. Illegal mining practices and over-exporting rare earths have hurt China's environment and depleted its resources. It’s time other countries share the burden of mining the metals, it says. As China's industries begin to consume most of its own rare earth production, Toyota and other companies are seeking to secure reliable reserves for themselves. Toyota has looked

9732/01/Prelim/Yr6/11 6 © RI 2011 [Turn over at rare earth possibilities in Canada and Vietnam. At the same time, the Japanese have started accumulating stock-piles in response to China’s export cuts. There is no viable rare earth substitute. Other metals have been tested, but they don’t work. Scientists have had some success in reducing the amount of rare earths needed in products, but not enough. Efforts being made to reuse and recycle the many tonnes of rare earth metals currently thrown away (in discarded mobile phones, hard drives, and so on) are unlikely to make a difference on their own. Even if any of these initiatives do eventually succeed, new mines still take years to build. Source: various Extract 3: Battle for renewable power play Don't be surprised if you hear China being hailed as the planet's first green superpower. The State Council, China's cabinet, will soon release the details of a staggeringly large "new energy" programme that could propel the world's biggest greenhouse gas emitter past Europe and the US into a global leader in renewable energy and low-carbon technology. Reports in the domestic media and from foreign diplomats suggest between 1.4 trillion (US$200 bn) and 4.5 trillion yuan (US$600bn) will be invested over the next ten years in nuclear power plants, solar and wind farms, hydroelectric dams, "green transport", "clean coal" and super efficient electric grids. China could emerge as the unquestioned global leader in clean energy production, significantly increasing its chances to wean [itself] off coal, and at the same time ushering in an era of sustainabl e economic growth by exporting these clean- energy technologies to the world." For the rest of the world, the problem is that the rare earths which the Chinese deem so important to their technological and green future are already critical for maintaining t he West’s technological and green present, let alone a future of green growth and sustainable production. For example, China has announced that over the next two decades, it will construct some 133 gigawatts of wind turbine generated electricity. This is l ikely to dramatically impact the supply of the rare earth metal such as neodymium, dysprosium, and terbium, the last two of which are among the rarest of the rare earth metals. Some rare earth elements such as cerium and neodymium are more abundant and concentrated. In contrast, dysprosium and terbium are less plentiful in world’s mining deposits and are harder to extract than the others. This is a direct challenge to the West’s march toward a greener future. Source: various Extract 4: Rare Earth Processing