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In 1803
Napoleon Bonaparte reportedly said, “China is a sickly,
sleeping giant. But when she awakes, the world will
tremble.”
His knowledge of
China
came from Jesuit priests who held high positions in the
Chinese court. After 200 years, that giant has awakened
and there may well be good reason for the world to
tremble.
For the
last 50 years most of the world, both in
Asia and the West, feared
China
primarily for its unpredictable nature, particularly in
foreign policy. Its saber rattling over Taiwan never
makes sense in the larger picture of geopolitics and
geotrade. Yet, that aggressive stance about Taiwan
independence has never wavered or changed.
The
economic path
China
chose after Mao also has never faltered. I can remember
in 1989 entertaining a Chinese, an executive vice
president from The Farmers Bank of China who said that
in five years China would be self-sufficient in food as
this was the government’s only goal and only project. He
was correct, and China achieved its objective.
As that
ambition was achieved, China then embarked on
industrialization as its only goal and project. In the
last years of the 20th century, China built its
storehouse of foreign- currency reserves to be able to
pay for its march into the 21st century. And now,
China
is a major force on the world economic stage, providing
products for all the world to buy.
Yet, the
next five to 10 years will see China increase its impact
on the global economy in ways that will make the past 10
years pale in comparison. The “giant” has progressed in
these past two decades from being sick to healthy, but
it has only started to awaken in the last few years; and
the impact of a fully aroused
China,
both with opportunities and dangers, is only now
becoming fully apparent.
China’s
industrialization is like that dragon of fables that, as
it grows larger, requires more and more food. And the
food that sustains industrialization are minerals.
From The
Times of
London: “In 1990
China
accounted for only about 5 percent of all copper demand
and 3 percent of aluminum and iron ore. The country is
already the largest buyer of nickel, copper, aluminum,
steel, coal and iron ore. Only in oil does it fall
behind, coming second to the United States.” China’s
share of global steel consumption had increased to 57
percent of total supply.
The
numbers, the increase in strategic mineral consumption
in China, are truly staggering. “China already accounts
for 47 percent of all iron-ore consumption, 32 percent
of aluminum and 25 percent of copper.”
And this
is not the end. “Tom Albanese, Rio Tinto mining’s chief
executive, has predicted that within the next couple of
years this will move to 58 percent of all iron ore, 45
percent of aluminum and a third of all copper.” China
currently uses approximately 500 million tons of iron
ore per year. That will grow to over 1 billion tons by
2015.
The
crown jewel in industrialization, though, is copper. Per
capita world copper consumption has grown from 1.15
kilograms per person to over 2.5 kg in the last 50
years. To sustain industrialization, copper must be in
constant supply. You need the iron ore to build the
automobile factory. But every car produced at that
factory uses 30 kg of copper. In 2006 for example, world
production of refined copper was 17,331 million metric
tons, but global consumption was 17,042 million tons,
leaving a very small surplus.
The
Chinese dragon is not only concerned about the supply of
its raw materials but the source of those materials.
China is actively looking to its nearby neighbors to
ensure a steady and convenient supply for its purchases.
And that is where the
Philippines
needs to be at the forefront.
In 2003
the price for a pound of copper was well under $1;
currently the price is well above $3 a pound. As with
all of our other mineral output, Philippine copper
production peaked 24 years ago and since then has
dropped by a third. Copper historically was the most
valuable of all the Philippine mineral production.
Philippine copper reserves were estimated at 4.79
million metric tons in 1996. The country’s problem is
not having the resources. The trouble is always the
same: using the resources properly, be it from the
ocean, from the land or under the ground.
Chinese
companies have actively pursued joint mining ventures
with several Filipino firms; most of these having not
come to fruition. From some strange reason, Chinese
companies often have trouble doing business here,
whether in broadband telecommunications or other
industry sectors.
All
industry estimates about Chinese mineral consumption
forecast the same scenario. Demand will peak in and then
fall after 2015. That is how much time the Philippines
has left to ride the dragon’s eating frenzy.
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