Video #25 - China: Commodities Consumption
Monday, January 16, 2006BACKGROUND INFORMATION
"The peaceful rising of China will most likely be the most important event on the world scene in the first half of the 21st century."
U.S. Deputy Secretary of State Richard Armitage
"China's new role as the world's largest consumer of many industrial commodities will force everyone to rethink their assumptions about foreign policy, military policy, and even the conduct of monetary policy during the early decades of the 21st century."
U.S. economist David Hale.
David Hale compares China's current economic growth to America's arrival as a world power during the early decades of the 20th century." This has led China to vastly increase its demand for commodities such as copper, iron ore, aluminum and platinum- and as a result, it now effectively sets their price on the world market.
China's industrial production has risen by 18 percent; exports by 40 percent. Additionally, China's rapid urbanization has boosted its need for steel. (Its steel production already surpasses both Japan and the US, at 220 million tons per year). The Asian nation also needs vast amounts of cement. As a result, it has become the world's largest producer and consumer of this commodity, using six times as much as the US.
One example of China's economic global impact is the fact that thermal coal prices rose by 20 percent because China cut its exports from 80 million tons in 1991 to 74 million tons in 2003. Hale reported: "The impact of China's raw material demand on global trade has been so dramatic that shipping rates have quadrupled during the past 18 months."
China has also become the world's second largest oil consumer, overtaking Japan, and causing world oil consumption to expand by one-third. David Hale proposes that China's needs may lead it to adopt an aggressive foreign policy. Case in point: the 4,000 troops China has sent to Sudan to guard its investment in an oil pipeline. In Saudi Arabia, Hale reports that American firms were blocked from investing in its new natural gas industry in favor of Chinese firms.
Ian Bremmer, President of the World Policy Group, agrees with Hale that China's intrusion in the U.S.'s economic sphere of influence may cause conflict between the two nations. If its oil consumption continues to increase at the current rate of 7% a year, by 2022 China's consumption will equal that of the US. As a result, China is pursuing long term contracts with traditional U.S. oil providers such as Iran, Venezuela and Russia.
According to the newsletter Adhesive Trends: "In November 2004, China signed the largest energy deal in Iran's history - an agreement to buy 250 million tons of liquefied natural gas over 30 years. Iran will also export 150,000 barrels of crude oil per day to China once Sinopec, a Chinese state-owned energy company, has developed Iran's Yadavaran field. The deal is valued at $70 billion. In Venezuela, China has reached an agreement to gain development rights to 15 oil fields and will be allowed to build refineries there." Nevertheless, some experts claim that China and the U.S. are so economically interdependent that they must work to resolve these conflicts.
David Hale adds: "In the past, G7 central banks focused primarily on their own business cycles and the American economy. In the future, they will have to take account of how fluctuations in the Chinese economy are affecting global commodity prices." The search for raw materials has increased China's interest in Latin America. (See Assistant Secretary of State Roger Noriega's testimony before the House International Relations Subcommittee on the Western Hemisphere on April 6, 2005).
According to Mr. Noriega's testimony: "In 1999, China exported about $5 billion worth of goods to Latin America and the Caribbean and imported about $3 billion worth of goods. By 2004, Chinese exports to the region rose to $18 billion and imports, primarily soy products and minerals, rose to $22 billion. (Thus, the region now runs a trade surplus with China, according to official Chinese statistics).
These facts show that China's economic emergence also has major geo-political consequences worldwide.
SOURCES
"Armitage Sees Momentous World Impact in China's Growth." U.S. Department of State, December 21, 2004. www.usinfo.state.gov "China Seeks More Influence in Latin America, State's Noriega Says" usinfo.state.gov, April 7, 2005. "That unsettling sleeping giant." The Australian, June 30, 2004. www.theaustralian.news.com.au/printpage/0,5942,9992273,00.html "U.S. Competing With China For World Oil." Adhesive Trends ITW TACC February/March 2005. www.itwtacc.com
Hale, David, "Will China need a Blue Water Navy to Protect Commodity Imports?" Chinaonline.com
Heath Christine, "Repercussions of China's economic boom." United Press International, 7/19/04.
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Understand the changes that have taken place in China's economy in recent years.
- Describe the areas of competition between China and the US.
- Speculate about the role of China in the global economy in the future.
MATERIALS:
- Background information provided.
- Resources on China available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines."
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Create a time line illustrating events which have lead to China's economic boom.
- List examples of China's economic impact in regional economies such as Europe, Latin America, Southeast Asia, The Middle East, Africa.
- List examples of areas where China and the U.S. may conflict in the near future.
- List examples of areas where China and the U.S. need to cooperate for the common good.
- Use the information provided above to create a scenario depicting China's relationship with the U.S. in 2025.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
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