Growth requires resources and the rest of the world does not understand the real story of resources in China. From water to minerals to ore to oil to electricity to land to renewable resources like lumber, China faces constraints on resources that are little understood and unappreciated by most of the rest of the world. China imports half its iron ore. China imports nearly half of its crude oil and is (desperately) searching for more. It’s a similar story for many commodities.
Resource demands like these are primary determinants of Chinese policy; both foreign and domestic. The need to secure sea lanes for safe passage of oil and ore drives naval policy. Securing land routes for pipelines is a prime mover in the “Go West” policy currently being enacted by the government. Securing sources of resources is just as important and it creates interesting, though certainly not unprecedented, linkages between the Chinese government and Chinese companies. When you see an important Chinese official in a remote African country announcing an aid package, you can bet there’s an agreement on resources that goes along with it. The aid often takes the form of light and easy to implement infrastructure like mobile phones. That’s where you’ll see the linkages. For example, Huawei (Chinese Telecommunications Equipment Manufacturer) has been very successful in Africa in mobile phone infrastructure in support of Chinese aid packages to African countries. This really isn’t unique to China; access to technology and know how in return for resources has been a pattern throughout history.
Building distribution infrastructure in China is an important usage of the fabled currency reserves that the Chinese government has so carefully hoarded. Pipelines, electrical distribution line, highways, canals, and the like are a priority for China. Earlier this year, China completed its first oil pipeline from Kazakhstan. That single pipeline will provide about fifteen percent of the annual oil consumption, based on 2005 levels, of China. Protecting that pipeline through what is a relatively narrow land corridor along China’s northern border is a determinant of Chinese military and economic policy. You see this in the recent anti-terror exercises conducted in the western provinces and in the “Go West” policy. One of the best protections for infrastructure is to put a lot of folks around it. The folks then serve as sentinels and, if necessary, as defenders.
Of all the resource shortages the most critical shortage is water. The water situation in China is dire. Statistics abound; put “china water shortage” into your favorite search engine and you’ll get millions of factoids. Basically, there’s not enough usable and drinkable water because of scarcity, pollution and waste. China starts with water availability per capita of around one-fourth of the global average. Most of the rivers are too polluted to serve as sources for drinking water. The pipes that distribute fresh water leak profusely. Some estimates place the leakage at nearly one-third of the usable water distributed.
Growth requires resources and growth is shaped by the availability or not of those resources. China has people aplenty. For everything else, there are constraints that will shape, channel, or inhibit growth over the coming years. Understanding those constraints will help you understand important determinants of Chinese economic, foreign, military, and domestic policy.
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