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China special: Growing pains of a superpower
Peter Aldhous and Gregory T. Huang, New Scientist
THE 21st century, we are told, will be China’s. Usually this is intended as a warning: if the world’s leading economies fail to respond to the Chinese “threat”, we will face a second-class future trailing in the wake of the People’s Republic.
This blinkered view gets us nowhere. China is a proud nation with a turbulent history, and it makes no secret of its superpower ambitions. It is certainly a fierce competitor for resources – witness the panic in the US about China’s thirst for oil, and what that means for fuel prices. But this vast and diverse country is already much more than a simple adversary. Without China’s supply of cheap manufactured goods, massive overseas investment and talented labour, the world’s economy would be in serious trouble.
In this age of globalisation, China is also a partner – which is why we should all be concerned about the challenges ahead. China faces immense social, political and environmental problems, and whatever is a problem for China is by definition a problem for everyone else too.
…China’s leaders are no fools. Most senior members of the central government were trained in that most practical of disciplines, engineering. They know that the nation’s present trajectory is unsustainable, both economically and environmentally. If China is to continue its remarkable development, it must transform itself from an exporter of cheap manufactured goods built to western blueprints into what its leaders call an “innovation nation” – able to sustain its growth through home-grown ingenuity. So they are pouring huge sums into science, particularly at the applied end of hot fields like nanotechnology and renewable energy. China’s spending on research and development has more than doubled in the past five years, and official plans call for a further rise – from 1.34 per cent of GDP in 2005 to 2.5 per cent by 2020.
If the plan bears fruit, some of the innovations that will be needed to solve global problems are likely to come from China. Already, top Chinese researchers and entrepreneurs trained abroad are returning to their homeland in unprecedented numbers. They are emphatic about one thing: wanting China to be able to stand with the US and other leading nations as an equal partner.
(7 November 2007)
China seeks 30 pct increase in Saudi oil imports
Reuters
China has asked for a 30 percent increase in crude oil imports from Saudi Arabia for 2008 and also aims to raise imports from Iran, partly to feed two new refineries amid steady demand growth, trading sources said on Friday.
Sinopec Corp, Asia’s top refiner, wants to increase Saudi crude imports to 600,000 barrels per day for next year, up from this year’s 460,000 bpd, a trading source close to the supply talks told Reuters.
The supply pact, pending Saudi confirmation, would foster closer energy ties between Beijing and Riyadh, while maintaining the kingdom as China’s top oil supplier.
(9 November 2007)
How China is eating the world
Sean O’Grady, The Independent
China’s remarkable economic growth is powering the global economy, but can the world afford to keep on supplying its ever-growing demands for food and raw materials?
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Economists are notorious for being unable to reach an easy consensus on many issues, but talk to any of them about the outlook for the global economy and before long the word “China” always starts to dominate the conversation. And it is true that the robustness of Chinese economic growth – around 10 per cent forecast for 2008, barely changed on recent trends – is picking up the pace being lost by faltering Western economies. Trouble is, they’re also eating the world – literally, in the case of food supplies.
According to the IMF, about half of the world’s economic growth this year will be accounted for by Brazil, Russia, India and China – the BRICs. India, staggeringly, is contributing more growth to the world economy than the United States, but China is by far the most powerful engine of growth – more so than the US, the eurozone and Japan combined. So, “China saves the world” – or at least helps to maintain global economic growth around the 5 per cent mark. Were it not for China and these other emerging economies, the world might well be staring a recession in the face.
Yet this phenomenon is not an unalloyed economic good. As yesterday’s news about Rio Tinto and BHP demonstrates, the commodities price boom has led to huge valuations for companies in this field; great for their shareholders, but another signal that the insatiable Chinese demand for oil, copper, zinc, nickel and all the other raw materials of industrialisation is pushing the prices of those commodities to ever-higher peaks.
…The big picture, according to Credit Suisse, is that, globally, demand for food and biofuels will grow at about 3.3 per cent per annum – compared with the historic average of 2.3 per cent. Can supply – of food and other commodities – keep pace with a step change in demand?
It was Thomas Malthus who predicted, way back in 1798 as the West was undergoing the transformation China and India are now, that the tendency for populations to rise at a geometric rate while agricultural production rises at an arithmetic rate would constrain population growth through periodic famines. Malthus was wrong, because he failed to foresee the rapid growth in agricultural productivity – crop rotation, selective breeding and mechanisation. Agronomists are scarcely less imaginative today, yet there are political, environmental and physical obstacles which make the business of extracting more crops for fuel and food tricky. Genetic modification, for example, is viewed with deep suspicion by some shoppers, and politicians have shown themselves unwilling to take on the voters’ prejudices. Ditto the supermarkets, at least in the UK.
Apart from China, Brazil, Indonesia and Argentina have the greatest potential for increased acreage and urbanisation, but the environmental cost – itself an economic burden that will have to be shouldered – ought to restrict incursion on pristine environments. When it comes to productivity – the factor that saved the world from a Malthusian nightmare 200 years ago – things are looking a little grim. In the case of cereals, productivity has grown at only 1.3 per cent in the past 20 years.
So the outlook is for agricultural, commodity and oil prices to carry on rising. The $100 barrel of oil could be just the start.
(9 November 2007)
Missing from the article is the fact that the U.K., the U.S. and other industrialized economies have been “eating the world” for more than a century. One can see why the Chinese might get annoyed at this fingerpointing from the West. -BA
