China rising

Written By: - Date published: 9:37 am, September 25th, 2010 - 37 comments
Categories: capitalism, International, socialism - Tags: ,

The idea of The Chinese Century has been around for a long time now. But a couple of articles that caught my eye recently make me think that the start of that century is well and truly upon us. The first:

America Is Suffering a Power Outage…and the Rest of the World Knows It

… Just as the Obama administration revised those anemic GDP growth rates downward, China’s economy was passing Japan’s to become the second largest on the planet. While the Chinese GDP is steaming ahead at an annual expansion rate of 10%, Japan’s is crawling at 0.4%.

China’s leaders responded to the 2008-2009 recession in the West that led to a fall in their country’s exports by quickly changing their priorities. They moved decisively to boost domestic demand and infrastructure investment by sinking money into improving public services.

While Western governments tried to overcome the investment slump at the core of the Great Recession indirectly through deficit spending, China raised its public expenditures through its state-controlled banks. They provided easy credit for the purchase of consumer durables like cars and new homes. In addition, the government invested funds in improving public services like health care, which had deteriorated in the wake of the economic liberalization of the previous three decades.

Altogether, these measures boosted the GDP growth rate to 9% in 2009, just when the American economy was shrinking by 2.6%. Such a performance impressed the leaders of many developing countries, who concluded that China’s state-directed model of economic expansion was far more suitable for their citizens than the West’s private-enterprise-driven one. …

Overall, the Great Recession in the West, triggered primarily by Wall Street’s excesses, provided an opportunity for Beijing to stress that, in socialist China, private capital had only a secondary role to play. “The socialist system’s advantages enable us to make decisions efficiently, organize effectively, and concentrate resources to accomplish large undertakings,” said Prime Minster Wen Jiabao in his address to the annual session of the National People’s Congress in March.

Hmmmm. Interesting counter example to all the small government rah rah free market (gimme tax cuts!) rhetoric we get from our resident right wingers. Anyway:

… More worrying to White House policymakers is the way Beijing is translating its economic muscle into military and diplomatic power. … By then, Beijing had locked horns with Washington, challenging the latter’s claim that the Yellow Sea is an international waterway, open to all shipping, including warships. This is an unmistakable sign that the Chinese Navy is preparing to extend its reach beyond its coastal waters. Indeed, plans are clearly now afoot to extend operations into the parts of the Pacific previously dominated by the U.S. Navy. …

Watch this space. On to the second article:

Amid Tension, China Blocks Vital Exports to Japan

Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.

Chinese customs officials are halting shipments to Japan of so-called rare earth elements, preventing them from being loading aboard ships at Chinese ports, industry officials said on Thursday.

I’ve written about “peak metals” here before. They are the rare minerals that are vital to the manufacture of all sorts of electronic equipment. They are running out. Fast. China controls the majority of the world’s reserves. And now they are starting to use that control as an economic weapon.

… China mines 93 percent of the world’s rare earth minerals, and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound. … The Chinese halt to exports is likely to have immediate repercussions in Washington. The House Committee on Science and Technology is scheduled on Thursday morning to review a detailed bill to subsidize the revival of the American rare earths industry.

How’s your Mandarin / Cantonese? How is New Zealand placed to fit in to The Chinese Century?

37 comments on “China rising ”

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  1. joe90 1
    25 September 2010 at 10:00 am

    Australia appears to be having a bob each way.

  2. Draco T Bastard 2
    25 September 2010 at 10:28 am

    The US Empire is going to wind down and their own actions have sped that up. That was inevitable from the beginning. The rise of China, though, has come at a precipitous time which puts a few stumbling blocks in their way and those stumbling blocks may actually prevent this century being the century of China.

    One is Peak Oil with, as you point out, Peak Metal as well. Resources are drying up. The second is their population. Quite simply, they can’t feed them and with resources declining their ability to feed them will decrease as well. This will, after time, result in food riots.

    How’s your Mandarin / Cantonese? How is New Zealand placed to fit in to The Chinese Century?

    Our best bet isn’t to learn Cantonese but to become a self-sufficient and sustainable economy rather than reliant upon trade. The Chinese actions of restricting and stopping exports of raw resources is only a small highlight of what is to come. Eventually, all countries will stop such exports as they will be keeping them to benefit their own populations. We have to do the same as no amount of money will replace the resources that we have.

    • Lanthanide 2.1
      25 September 2010 at 12:19 pm

      China has been going around the world investing in oil wells, exploration and oil companies. They will likely be able to corner a good chunk of oil production for themselves, and they do produce quite a bit domestically also.

      • Loota 2.1.1
        25 September 2010 at 12:45 pm

        Word is that china has been expending some of its vast foreign currency reserves – which if you look at them in a certain way are only useless bits of paper and electronic ledger records – for real material reserves. Literal mountains of coal, aluminium and steel ore, and other raw materials, stockpiled as high as buildings in secure locations on Chinese territory, as well as forward supply contracts for much more.

  3. comedy 3
    25 September 2010 at 10:34 am

    Let me guess those growth figures are courtesy of the Chinese govt ?

    and re rare earths fund this which is interesting

    “China tried to position itself instead as a reliable supplier, partly to discourage other nations from digging their own rare earth mines.

    Despite the name, rare earths are actually fairly common; they are expensive and seldom mined elsewhere because the processing equipment to separate them from the ore is expensive and because rare earths almost always occur naturally in deposits mixed with radioactive thorium and uranium. Processing runs the risk of radiation leaks, — a small leak was one reason the last American mine was unable to renew its operating license and closed in 2002 — and disposing of the radioactive thorium is difficult and costly.”

    http://blog.jmhamiltonpublishing.com/2010/09/23/china-mines-93-percent-of-the-worlds-rare-earth-minerals-and-more-than-99-percent-of-the-worlds-supply-of-some-of-the-most-prized-rare-earths-which-sell-for-several-hundred-dollars-a.aspx?ref=rss

    • r0b 3.1
      25 September 2010 at 10:43 am

      Let me guess those growth figures are courtesy of the Chinese govt ?

      Come right out and say it if you don’t believe them comedy. Don’t be shy.

      Despite the name, rare earths are actually fairly common; they are expensive and seldom mined elsewhere

      From my reading it seems that this is the case for some but by no means all of the “peak metals” (see that link in the original post). There’s more to it than “rare earths”…

      • comedy 3.1.1
        25 September 2010 at 11:08 am

        I’m sure China is growing, I’m also sure the centrally massaged figures are about as reliable as their estimates of SARS,AIDS, Bird flu from their health ministry.

        I’m sure you also realise that a very large proportion of the population (outside the large economic protected zones) live in relative poverty and that their consumption and consumerism will quickly make even the USA look like an environmental white knight.

    • Marty G 3.2
      25 September 2010 at 10:53 am

      I’m not aware of any suggestion that China’s official growth figures are seriously out of whack.

      the extraction of any fixed resource will folow the same pattern, rising and peaking while the bulk of the reserve is still unextracted. here’s a dicussion of gold, for instance: http://europe.theoildrum.com/node/5989 (fortunately, our indisustrial use of gold is easily covered by recycling)

      also, peak copper http://www.theoildrum.com/tag/peak_minerals

      the good thing about metals is they are usually not destroyed or rendered useless when used, unlike hydrocarbons, but peak metals means that our ability to expand the amount of metals we are using will be limited. when you’re talking about metals that are needed for batteries or lightweight magnets, for example, that’s a real challenge for mass-producing electric cars to replace fossil fuel burners.

      • Marty G 3.2.1
        25 September 2010 at 10:54 am

        btw, I think the eventual solution there will be nano-engineering to get similiar physical qualities out of more common elements.

        • Zorr 3.2.1.1
          25 September 2010 at 11:23 am

          From my experience in chemistry research we are nowhere near that point where that form of nanotechnology is available for production. We are going to be relying on rare earths for a long time yet.

        • Lanthanide 3.2.1.2
          25 September 2010 at 12:22 pm

          Or, very cheap power from fusion, to the point where the oceans can be mined for the trace minerals that are currently uneconomic to extract. There’s more gold in the oceans than the rest of the planet combined. As for fusion, don’t say it’ll “never happen” or that it is “50 years away”, it could be as little as 5 before the first commercial operations are up: http://www.emc2fusion.org/

          Polywell is currently being funded by the US Navy, and results from the latest test were promising enough that the Navy continued funding. There is very little public detail about the results, however the guy running the project has said that although the results didn’t show it was 100% guaranteed to work, they also showed that at this stage there is still good evidence that it will.

          • pollywog 3.2.1.2.1
            26 September 2010 at 11:16 am

            ^^^now thats what i’m talkin about…sort of

            nu energy developed by breakthroughs the ‘Einstein of the 21st century’ has yet to reveal…whoever that may be ?

            It should be remembered, that western economic and military supremacy is a blip on the timescale when looked at over a longer period and that in a sense, China along with India are only re asserting their place in the natural order.

            China rising is actually China re-rising after 200 years of outside influence and the Chinese century could probably be the Chinese millenium.

  4. dave brown 4
    25 September 2010 at 11:17 am

    The rise of China is not down to its being ‘socialist’ which it isnt. Socialism means the working class majority control of the economy. China’s ‘socialism’ was always control by an elite bureaucracy that tookover running the economy when the Chinese capitalist class fled the national revolution. That bureaucracy planned the economy which took off as a result but then found isolation from the global capitalist market led to economic stagnation.
    Opening up to the market revived the economy but restored market incentives, that is the profit motive and a capitalist class that is motivated by profit. China never was socialist but its experience of central state planning has allowed it to resist being dominated by the US, Japan etc, so that it is now an emerging capitalist imperialist power.
    What this means is that we should stop talking about China as some single national entity. The class divide is much more significant. The biggest factor that will shape the future of the world is the capacity of the Chinese working class and poor peasants to rise up and bring about a real socialist revolution.
    Similarly talking about NZ as a single national entity ignores the growing class divide which is opening up like the Canterbury fault hidden by layers of silt and shit for eons. NZ workers need to learn Cantonese so they can speak to and join forces with Chinese workers in the future socialist century.

    • comedy 4.1
      25 September 2010 at 11:23 am

      “The biggest factor that will shape the future of the world is the capacity of the Chinese working class and poor peasants to rise up and bring about a real socialist revolution.”

      The party in power would exterminate millions before giving up their control – as would many parties in power around the world.

  5. Jeremy Harris 5
    25 September 2010 at 11:23 am

    I see peak oil and peak metals as linked by energy efficiency…

    In the past we have had economic growth by increasing hydrocarbon energy and mineral use and by increasing efficiency (which has approximately doubled since 1970) and by figuring out new ways to exploit formerly benign resources…

    In the future economic growth will come from increasing renewable energy and by increasing efficiency and new forms of resource exploitation… This is a good thing – more eco friendly, truly sustainable economic growth…

    The problem in the meantime is that governments will not recognise the issue and will legislate to try and keep the status quo in place… Making it likely that renewable development will lag behind energy decline and meaning a large decline is very possible… Given that our current system needs growth to ensure it’s viability this transistion may trigger a depression…

    DTB will get his wish, we’ll be manufacturing a lot more of our goods here in NZ but because the market will ensure a switch from a world economy based on wage arbitrage to one based on the price of bunker fuel… If a plasma TV is made in Kelston by Lemi, instead of by Kwok in Seoul you can expect it to cost $5,000 instead of $700 – that’s the trade off… No reason we shouldn’t still trade globally as we did when refridgerated ships were powered by sails…

    • Draco T Bastard 5.1
      25 September 2010 at 12:01 pm

      Refrigerated ships weren’t powered by sail – they were powered by coal. Or, to be more precise, their motive power was from sail but their refrigeration was powered by coal. Climate change pretty much removes the incentives to use coal in such away again. That said, I do expect international trade to continue but it’s going to be very limited and nations are going to have to become self-sufficient. Effectively, trade will be limited to luxury goods such as bananas.

      If a plasma TV is made in Kelston by Lemi,…

      A plasma TV isn’t made by people but by factories and a factory in NZ is just as efficient as a factory anywhere else ergo, the cost in NZ will be cheaper as it won’t have the cost of transport.

      • nilats 5.1.1
        25 September 2010 at 12:35 pm

        How do you think someone on min wage will afford a TV made in NZ? They will not and it will become a luxury for the haves unless you save for a couple of years. Also, no export earnings as cost base is too high if Taiwan makes for $700. Also, NZ is not well placed on resources, such as rare earths and we all know what China is doing with this at present. Buying a little of this and that does not work as price will be astronomical. 1000kg (Australia’s requirement say) costs $200/kg, 100kg (NZ requirement say) costs $800/kg as economy of scale is small. Raw material supplies will be harder to aquire as they are getting scarse and costs will be prohibitive.

        If it comes down to ‘bunker fuel’ being the driver, then we may as well start mining in nice DOC land as no one will be able to come and see it anyway as we are isolated. We can use these resources to possibly export as well.

        • Loota 5.1.1.1
          25 September 2010 at 12:51 pm

          Given that an iPad’s labour content is only about 4% of its cost to Apple, tripling the cost of that Labour content would only slightly dent the end retail price of the product.

          And this is where the corporatist greed comes in. Logically, why give those additional monies away to ordinary workers on the line, when you can keep it all for your insitutional shareholders and as management bonuses? The financial wellbeing of the many is not part of the equation, just the financial wellbeing of the few.

      • Jeremy Harris 5.1.2
        25 September 2010 at 3:38 pm

        their motive power was from sail but their refrigeration was powered by coal.

        Sorry Iwas referring to their motive power… Don’t expect climate change to stop people using coal – in fact when people get that the oil peak has been passed and oil production is in terminal decline coal use will likely massively increase as well as coal to oil plants…

        A plasma TV isn’t made by people but by factories and a factory in NZ is just as efficient as a factory anywhere else ergo, the cost in NZ will be cheaper as it won’t have the cost of transport.

        That’s wrong in two ways:

        1). It’s wrong currently because Lemi expects to get paid more than Kwok and he will do due to NZ minimum wage laws
        2). It’s wrong in the future because the location and subsequent transport costs of the components assembled in factories will be the largest factor in determining where the factory in an oil constrained world will be – whoever/wherever minimises transport costs will make the TV cheapest

        When oil spiked over $150 US a barrell a couple of years ago we got a perfect example of this: US steel workers went on strike and for the first time in decades the mill owners actually gave a shit becuase the mills were working full bore… Before the spike it was cheaper to make a ton of steel by mining the ore in Brazil, shipping it to China, and then shipping the finished ton to the US – the saving came from paying the Chinese worker $5 US for the 1.5 hours he worked to smelt it rather than a US worker $60 US… When the oil price spiked it was actually cheaper for the first time in a long time for them to ship the ore direct from Brazil to the US and pay the US worker his $60… When we take into account western nations can smelt a ton of steel using 2/3 the carbon of a Chinese mill, if there are lots of ETS’, carbon taxes or carbon tariffs, we can see that some industries we thought gone forever from NZ will be coming back…

        We can expect to see a lot more of this going forward… But the market will still determine the best place to manufacture goods – if free trade is allowed to work, it may be cheaper to site a factory near it’s source resources and then ship the finished product, or ship the resources near the consumer and manufacture it there – it just depends on the product…

        • Draco T Bastard 5.1.2.1
          25 September 2010 at 3:58 pm

          1). It’s wrong currently because Lemi expects to get paid more than Kwok and he will do due to NZ minimum wage laws

          Except that that’s actually wrong. With incomes increasing in developing countries and decreasing in developed countries the people in both countries will expect to be paid about the same in real terms, i.e. having the same standard of living and for that to be a good standard. Then the only difference will be the difference in currency and developed countries will have to drop the value of theirs if they want to compete. China is keeping theirs low for that specific purpose which is why I said that we should be pegging ours to the value of the Yuan at a 1:1 ratio.

          free trade is allowed to work

          Free trade doesn’t work unless all rules everywhere are the same and currencies have the same value. The best place to manufacture goods is where the resources and the market are, i.e. the best place to manufacture goods for NZ is in NZ from NZs resources. This is true of all countries.

          • Jeremy Harris 5.1.2.1.1
            25 September 2010 at 4:12 pm

            Except that that’s actually wrong.

            It’s not wrong at all… Currently what I said is correct, that it will change in future is what I said in my very first post and it’s a good thing, i.e. countries with less wealth increasing it – and the standards of living of their citizens… For us to purposefully reduce our purchasing power is insanity, we already have enough poeple living in poverty thank you very much…

            Free trade doesn’t work unless all rules everywhere are the same and currencies have the same value.

            Free trade is simply that countries are able to trade with each other without artificial barriers such as tariff, bans, subsidies, etc distorting what can be produced at cheapest cost… The internal machinations of other sovereign nations is their business…

            • Draco T Bastard 5.1.2.1.1.1
              25 September 2010 at 5:42 pm

              The internal machinations of other sovereign nations is their business and can change the aspects of trade. If a nation doesn’t account for the cost of environmental degradation in manufacture when all others do the result will be that the “price” of manufacture there will be cheaper which will push more manufacture to that country. Such differences in rules create artificial barriers and other distortions in the market. Hell, that’s the NACTs rallying cry over the ETS so even those idiots understand that but their “solution” is to get rid of the rules altogether which, of course, isn’t a solution at all.

              No, if you want “free-trade” then you need all rules everywhere to be the same. It is only at that point that you will come close to having no artificial barriers to trade.

              • Jeremy Harris …
                25 September 2010 at 9:43 pm

                I disagree, if other countries choose to damage their environment that is their business and if it leads to products than can be produced cheaper by them than us, then our energies get moved into an area where we can produce a good within a level of environmental damage acceptable to our voters…

                It is the ability to trade freely that is the crucial factor…

                That is democracy and capitalism in action and to paraphase what Churchill said about democracy, “they are the worst systems – apart from everything else”…

                • Draco T Bastard …
                  25 September 2010 at 10:43 pm

                  Those countries can produce the same stuff we can. Free-market capitalism is a race to the bottom and ecological collapse. This is fact proven by history. The but we can produce something different… is a load of bollocks.

                  If they choose to damage their environment then we will choose to damage ours (and if fact are with massive subsidies to the polluters to do so).

                  • Jeremy Harris …
                    26 September 2010 at 3:20 pm

                    Free-market capitalism is a race to the bottom and ecological collapse. This is fact proven by history.

                    I’d say the history of the US from 1776 to 1913 demonstrates the opposite…

  6. Kleefer 6
    25 September 2010 at 12:18 pm

    Central planning cannot and does not work. It has failed in every other country and there is no reason why China would be any different. Almost everything that is being said about China now was said about Japan before 1990 but it turned out the hype was based mostly on the distortions caused by artificially low interest rates and an explosion in the money supply. While China will continue to grow and will remain a major trading partner for New Zealand there are serious economic imbalances that will only be corrected by a severe recession.

    • IrishBill 6.1
      25 September 2010 at 12:53 pm

      Historical perspective fail.

    • Loota 6.2
      25 September 2010 at 12:55 pm

      Central planning cannot and does not work. It has failed in every other country and there is no reason why China would be any different.

      You mean unlike the US system of capital and finance, which for about 2 years threatened to take down economies around the world? (And still might?)

      A lot of US states can no longer afford to pay their policemen, their teachers, or to keep road lighting on. And their latest healthcare reforms, born through the most painful political labour ever, still leaves 10-15 million americans without healthcare.

      I for one am not inspired.

    • RedLogix 6.3
      25 September 2010 at 3:58 pm

      Central planning cannot and does not work.

      Maybe that was true before the advent of sufficient computing power made the problem solvable.

  7. JJ 7
    25 September 2010 at 12:36 pm

    The thing with China is that it started growing at a phenomenal rate as soon as its government stopped employing policies which were seriously damaging to its economy. It will continue to grow at a phenomenal rate as long as it can increase its use of labour and capital resources. The thing with those is they both have diminihsing returns – eventually China’s growth will run out of steam (though not till its GDP per capita has at least doubled I’d say). After that the weaknesses in its interventionalist model may start to show.

    • Lanthanide 7.1
      25 September 2010 at 1:16 pm

      Yes, I’d agree. The government-run model is not long-term sustainable, but because they have such slack at the moment it is the best method to quickly pick the low-hanging fruit.

    • Jeremy Harris 7.2
      25 September 2010 at 3:43 pm

      I 100% agree…

  8. infused 8
    25 September 2010 at 9:22 pm

    Wall Street didn’t case the recession, greed did.

    The world is not running out of rare minerals. China just bought a lot of them up. USA is responding by doing the same.

    China will become #1 no matter what. Even if this recession didn’t hit.

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