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China's Resource Shortage May be Beneficial in Long Run - 2003-01-14

China faces a shortage of mineral resources and may have to sharply increase its imports over the next 20 years. Some economists say that this ultimately may be good for the country.

A report by the Chinese Academy of Geological Sciences quotes analysts calling the coming shortage of mineral resources "very shocking." The new report says China will grow increasingly dependent on imports, a situation it calls "very dangerous to national security."

The report says all mineral resources, including gas and oil, are in short supply. China is one of the world's biggest consumers of oil, and the report says its major oil fields could soon run dry. According to the report, only coal is plentiful.

Such frank admissions are a break from the Communist Party's past, in which it declared self-sufficiency in all areas key to China's security. But Ma Jun, a senior economist with Deutsche Bank, says the principle of self sufficiency has been gradually abandoned for most products. He does not see the prospect of importing minerals and raw materials as a threat to China's economy. "From [an] economic point of view it may actually be a good thing in the sense that it will improve the efficiency of the Chinese economy," he says. "China will be able to export more labor intensive products which is really to the Chinese advantage, and in exchange for commodities like energy and other mineral resources."

The geological academy predicts that China will need to import 70 percent of its crude oil by the year 2020, about 500 million tons. In comparison, China imported 65 million tons last year. It also predicts the country will import 50 percent of its natural gas needs, as well as huge amounts of iron, copper and other minerals.

Mr. Ma at Deutsche Bank says shifting to imports could pose a political risk for China's leaders. "There might be a political concern that in case of a major international, say, political or military conflict, supply of energy products to China may be disrupted, and this shortage of energy supply could be a threat to the Chinese economy." However, he says that risk is not large, and may be overcome by increased economic efficiency and growth.