to traditional Western companies,
further increasing competition
Some countries in the Caribbean and Latin American region continue to maintain weak commercial relations with China, despite its undeniable importance as a trading partner* * These graphs indicating imports and exports to the region from China and other Asian economies have been left in the original Spanish.
‘the China before China’ of the North American Free Trade Agreement countries.
This point was nicely made recently in the con-text of Brazil, which also competes in certain sectors:
‘There is a misbalance in our relations with China,’
said President Rousseff, ‘Brazil exports commodities and imports too may knick-knacks. This happens particularly between Christmas and Carnival. I am
told that 80% of this year’s Carnival costumes came from China.’
Perhaps she will have more success than President Christina Kirchner who recently announced a tax on cheap Chinese shoes (not for her, be assured!) – which was matched, post haste, by China suspending a 2 million tonne soya oil deal! On such issues does the world sometimes turn.
China: Some WOW facts
Description Data
Engineers graduating annually from schools in China 2 120 000
Average cost of a licence plate in Shanghai (RMB) 49 000
Cabs driving around Shanghai every day 50 000
Chinese MBA students expected to graduate in 2011. The number in 1998 was 0. 36 000
Mobile phones in circulation in China in 2011 986 million
Coal-fired power plants to be built in China in its 12th Five-year Plan 270 million KW 966 million KW Cities in China with populations that exceed 1 million. There are nine in the US and
just two in the UK. 125
New airports to be built in the 12th Five-year plan, bringing the total number to
more than 230 by 2015 70
Percentage of the world’s zippers produced 60
Percentage of the world’s toys made in China (there are more than 20 000 toy
factories) 70
Percentage of the world’s pork eaten in China 50
Children born every minute in China 31
Percentage of Chinese adults living with their parents 30
Nuclear power plants being built in China 6 (built); 10 (being built);
27 (planned) Passenger cars registered in China. The number in 2004 was 2.4 million. 14.5 million Students graduated from Chinese universities in 2010. The number in 1977 was
270 000. 6.14 million
Chinese estimated to visit ski resorts in 2011. In 1997, only 500 people in China
could ski. 6 million
Average number of credit cards a Shanghainese owns 1.05
China’s foreign exchange reserves at the end of 2011 uS$3 181 billion
Acronyms and abbreviations
CEPAL Comisión Económica para América Latina (Economic Commission for Latin America) EU European Union
GDP gross domestic product
OECD Organisation for Economic Cooperation and Development
tpa tonnes per annum
Endnotes
1 The China Quarterly, March 2012.
2 Myers: Inter American Dialogue.
3 Figures from Comisión Económica para América Latina.
4 Summarised by the Fraser rankings, where on the Policy Potential Index (a report card to governments on the attractiveness of their policies to mining investors) Chile ranks 7th out of 79, Botswana 14th, Zambia 57th and South Africa 67th.
Conclusion
The dialogue on Natural resource demand and China’s economy was convened in part to assess the impact on Africa of China’s possible future course. China’s rise over the past three decades – which since 1990 has outstripped the 20th century growth records of Japan and other East Asian states, such as South Korea and Singapore – has had an enormous impact on national and regional economies in all parts of the world. The combination of this sustained growth with China’s enormous size has produced a phenom-enon that’s only been witnessed once before (and to a much lesser extent) in the Japanese recovery after World War II.
Because of China’s size and its particular factor endowments, its entrance into the world market has fundamentally altered global patterns of pro-duction, trade and pricing. Unqualified labour has become much more abundant, while basic natural resources have become relatively more scarce. The sharpest reflection of this is a change in the terms of trade (the relative prices of exportable to import-able goods) that damaged other nations with much unqualified labour (like Mexico) or with little min-erals and other raw materials (like Costa Rica), but benefited resource-rich places like South America, Australia and Africa.
The terms of trade will be beneficial to mineral producers for years to come, even under the more pessimistic forecasts for Chinese growth. China could keep growing fast for years, as it’s far from the income levels at which the other ‘East Asian miracle’
countries ‘converged’. Chinese demand for min-erals is already massive, and the capacity of world resources, or the mining industry, to meet even exist-ing demand is limited.
None of this is to say that China is free of prob-lems – far from it. It must confront some serious
political challenges to internal stability, in addition to major social changes posed by the ageing of its population, rising inequality and a widening urban–
rural divide. Moreover, its exposure to complications in the global economy has shed further light on the poor quality of many of its banks and state-owned enterprises. In the mining sector, cost overruns and delays are increasingly common in Chinese opera-tions, and many are struggling to show that they’ve the managerial skills, local knowledge and exper-tise to operate in environments very different from China.
In a way, China has a ‘reverse Midas touch’: since it’s such a vast force, whenever Chinese enterprises enter a market they make whatever they offer cheap, and whatever they demand expensive. The more they grow, the more acute this problem becomes.
China is investing part of its enormous reserves in acquiring natural resources or the companies and facilities that produce them. This is a way of hedg-ing its bets: the better it does economically, the more damaging the reverse Midas touch is going to be for it and the more important it will be to be able to counter that phenomenon through the valuation of those investments. This means that, increasingly, China will be an investor and operator of mineral, grains, oilseeds and petroleum resources, and not only a buyer of the end products.
The improvement in the terms of trade that takes place as a consequence of Chinese growth reaches all countries, regardless of whether there’s a direct bilat-eral link. For instance, if Zimbabwe sells platinum, and Chinese growth increases the demand for plati-num, then Zimbabwe will be able to sell China more at a higher price, whether the mine is operated by locals, Chinese or third-party investors, and whether the platinum in question ends up in China or not.