The huge and robust Chinese economy continues to be hungry for vast amounts of resources and raw materials as Beijing seeks to sustain rapid growth. That momentum is fueled by oil, gas, rare earth minerals, ores, coal and farmland. For the rest of the world, a question remains - what is the impact for everyone outside of China? Is the massive gathering of resources good in keeping the global economy going, or will it have negative consequences for manufacturing efforts elsewhere? The independent Council on Foreign Relations turned to Elizabeth Economy and Michael Levi to help provide an answer. Their research produced the book By All Means Necessary. Elizabeth Economy, Senior Fellow and Director of Asia Studies at the Council on Foreign Relations, told Voice of America’s Jim Stevenson more about it.
STEVENSON: We have seen a very aggressive China with respect to the South China Sea, East China Sea and mineral rich areas that have overlapping claims by other countries.
ECONOMY: I think it is important to disentangle a resource quest from other concerns, namely in the East and South China Sea. It is certainly as much about resources as it is nationalism and sovereignty claims. Probably one of the most important findings that we had was that there has been this sort of understanding that China is the world’s largest source of overseas investment in resources and it is gobbling up supplies and producing resource scarcities and rising prices. But what we found is China is still a second-tier investor in much of the resource world. So for example in Africa, China ranks fourth, not the first, third in Latin America. It is third in Southeast Asia, and a very distant third after the European Union and Japan. I think the message we really want to get across with our book is that in many respects, the impact is much more nuanced and much more complicated than we tend to assume. It is important to understand those complications and nuances because only then can we figure out how we want to respond to China’s resource quest.
STEVENSON: Do we see China’s economy beginning to transform as Japan’s did and other industrialized nations in the past?
ECONOMY: I think that we are potentially at an inflection point. One of the things that our book makes a point of noting is that the past is not prologue. We shouldn’t look at what China has done before over say the past 35 years of going out for resources in a more aggressive way as what it’s going to continue. If China is able to rebalance its economy, to move away from investment and consumption-led growth, if it is able to make that same kind of transition, if it is able to become more efficient in terms of its resource use and conserve resources, then we can see a fundamentally different pattern of energy consumption, a different mix emerging. We haven’t hit that point yet.
STEVENSON: This resource quest as you write about has become a bit of a controversy for the rest of the world, especially when it comes to things like rare earths, which are very limited, and China is trying to scoop up as much as possible.
ECONOMY: Certainly the numbers are striking. If you just look on the face of it, by 2010 China accounted for 38 percent of local copper demand, 42 percent of aluminum, a similar number for other metals. When you look at something like rare earths, China already commands upwards of 95 percent of the production of these rare earths, most of which are in fact within their own territory. In general we do see that China is commanding a large portion of the world’s resources. This is a country that is close to 20 percent of the world’s population. So is it unreasonable in fact that they are consuming 10 percent of the global oil? So we try to put things within context, and also to make the point that if you look back at history, you can see that all rising nations dating back to ancient Athens have sought resources outside their borders to fuel their economies.