There’s been much wailing and gnashing of teeth over Pengxin Shanghai’s attempt to buy the Crafar farms. Justified too. I want to take a step back (fuck, I’m starting to talk like Key) and look at the strategy that China is executing and the imperatives behind it.
To perpetuate itself, any organism needs to expend effort and resources on securing access to the resources it needs to function. I’m hardly the first to note that a human society – just a collection of organisms, after all, behaves in much the same way. A powerful nation, or more accurately the governing elite of that nation, to grow and maintain its power, needs to secure access to the resources that enable it to do so. Chiefly – food, energy (in order, the world’s chief energy sources are – oil, coal, gas, nuclear, and hydro), and metals.
China obviously wants to grow. A) because that’s what States do, just like populations of any organism will grow if they can and B) because if China doesn’t grow, or if growth even drops to what we would regard as ‘normal’ levels, then the governing elite fears there will be revolution from the vast mass of people who will suddenly find the tide’s not rising any more and they’re stuck in a leaky dinghy while a few comrades are riding in big yachts.
China knows that is attempting to grow in a resource-constrained world. The oil is running out, the water is running out, the arable land is running out, the ores are running out, soon the coal and gas will be running out too, while the climate is changing and the population keeps growing in what is probably the biggest overshoot in the history of life on Earth. Peak everything is upon us. Rightwing morons can deny that if they want, a State that wants to perpetuate and grow its power can’t (the US faces the problem that it wants to do the latter but is run by the former).
So, what does China do?
The first instinct, that goes back to long, long before we were apes is to use physical force, violence, military power. But there’s already a big old silverback who has got that game all wrapped up. China is not wasting a whole lot of effort on matching the US militarily, just yet.
What China does have though, is $3 trillion US in foreign reserves which it accumulated as part of its strategy of running an undervalued currency to makes its exports more competitive and corner world manufacturing. Two-thirds of those assets are held in US dollar dominated bonds and other US assets. With the US now pursuing a beggar thy neighbour strategy of printing money to cause inflation and devalue the US-dollar debt of its debtors, China has good reason to want to convert as much of that cash as it can into hard assets.
So, China has two reasons to buy lots of things: it’s getting a low or negative return on holding US dollars and it needs to secure its resource chain to ensure its power in an increasingly resource-constrained future. Both of those are reasons to accept low rates of return, which is just the finance way of saying ‘think a long way into the future, something that even Pengxin’s New Zealand shill says is part of the Chinese national psyche (maybe its something to do with having a 4,500 year history too, Iran has the same outlook and claims the same lengthy history as a civilisation – settler states like the US and NZ just don’t seem to get how to think long-term).
And the great thing about having more money than you know what to do with and being willing to accept lower rates of return than Western corporations is you can outbid them every time. This is happening around the world with the Chinese Investment Corporation and dozens of major Chinese corporates which are, of course, tightly government-linked (to be major in a country where all the land is government-owned and executives get executed if they displease the authorities, of course you have to be government-linked) buying up big chunks of energy reserves, mineral reserves, political capital with third world rulers, and, yes, farms. All of this is funded with soft loans, sometimes to the Chinese corporates, sometimes to the local rulers, who also find China is a source of aid dollars that doesn’t attach those pesky good governance conditions that the West insists upon.
China’s strategy is optimal. It’s what any smart rulers would do in China’s situation. It’s allowing China to secure preferential access to resources and ruling elites around the world, ensuring its future power. In a strategic blink of an eye, China has gone from being that cheap country where crap gets made to being the world power house that’s more and more dedicating the run of play. It happened while the neoliberals were congratulating themselves on ‘solving’ inflation when all they had done was rip up our manufacturing and send it to China, which made cheaper products, which we bought with money borrowed from China while telling ourselves we were getting richer. It’s the most impressive, and relatively blood-free, rise of a world power ever. And it’s contributing to the astounding collapse in US hegemony (wasting a trillion dollars in the Middle East fighting several bunches of amateurs with AKs to bloody draws helped too).
But that doesn’t mean New Zealand has to just go along with it.
We’ve got our own interests to look out for. Chief of which is making sure that the wealth we produce is enjoyed by us. That means keeping our profits here, not acting like a bunch of yokels – selling the farm to the first out of towner with a big wad of cash who shows up and then, once we’ve drunk our ‘profits’, finding ourselves working for his gain forever.
I don’t care about the details of the overseas investment regime, as long as it makes sure we don’t go selling the base of our country’s economy for a bit more cash up front now. Our well-watered, fertile fields are our ace in the hole. They’re only going to become more profitable in the future. Selling them for a few pieces of soft-loan silver would be moronic.
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