When I first started traveling in southern China in 1979, the country was virtually self-contained and self-sufficient. It had very little intercourse with the outside world.
But now 35 years later, China’s economic emergence has become a truly global story. China isn’t a regional issue. It has become a global one because the Chinese are in every country in the world seeking to acquire energy, food and raw materials, say the authors of a new book, “By All Means Necessary: How China’s Resource Quest Is Changing The World.” The authors, Elizabeth C. Economy and Michael Levi, are researchers at the Council on Foreign Relations. Ms. Economy has done much fine work on China, including a book on the environmental damage the Chinese have inflicted on themselves. Mr. Levi is an energy specialist. I was pleased to attend an event at the Carnegie Council on Ethics in International Affairs where they spoke.
The pattern that Chinese state-owned and private enterprises are using around the world, particularly in developing countries, is to supply low-cost financing to build the infrastructure to tap natural resources and in some cases supplying low-cost Chinese labor to do the actual work. These often are sweetheart deals with officials in local governments, which U.S. companies are legally barred from pursuing. “There are the backroom deals at which the chinese excel,” Ms. Economy said. “They do that at home and they do that when they travel.”
Mr. Levi said that China’s demand for resources “may be changing the world in more ways than anything else” the Chinese are doing. Many countries are benefitting by selling raw materials to the Chinese, but one side effect is that prices have risen for those commodities and energy supplies. “We wouldn’t have moved from $10 a barrel to $100 a barrel for oil in a decadeif it wasn’t for Chinese demand,” he added.
China’s need for resources is likely to explode, it seems to me. The Chinese are trying to transform their economic model by relying on urbanization to provide growth, rather than relying on exports. The official target is to move 300 to 400 million people from agricultural lands to cities in coming years. In other words, the Chinese intend to double the size of their urban population. “We’re talking about urbanizing the same size population that’s already been urbanized,” Ms. Economy said.
That’s going to require enormous infrastructure–roads, bridges, rail lines, electricity grids, apartment towers, etc. China already is the world’s largest market for cars, and that trend can only accelerate. Ms. Economy thinks that the composition of China’s raw material needs will change, but she wasn’t sure that the overall demand will increase. I beg to differ with her on this score. It seems obvious to me that China’s overall demand is going to explode if they pursue their urbanization drive. She noted that urban residents use three times as much power as rural residents. So why doesn’t that add up to a doubling or tripling of overall energy demand?
I asked whether there are any flashpoints that American policy makers should be watching for. Mr. Levi said the key issues are China’s bid to expand its control over the sealanes that provide it with the raw materials it requires. That is the underlying motive behind China’s declaration of an air defense identification zone that encompasses much of the South China Sea and conflicts with territorial claims of Japan, the Phillipines and Vietnam.
I was prepared to be alarmed by what the authors had to say, but I came away puzzled by this enigma: If the Chinese are becoming so dependent on the rest of the world for resources, that suggests they can’t go to far in their military pursuits and they can’t be seen as being “aggressive” because that will turn the world against them and threaten their access to the materials they need. That could act as a check and balance. We will see. The one thing that is certain is that this subject–China’s conduct around the world in pursuit of raw materials–should be followed closely and monitored. It will be a major global trend for years to come.
