China is ever so in fashion these days. Indeed, a recent issue of Foreign Affairs ran two articles under the rubric "China Takes Off." And though none of the authors suggested that China would be the world's next superpower, the feeling remains that the majority of analysts see this as a possibility. That feeling was reinforced at the recent G7 summit where, yet again, a flotation of the Chinese currency was seen as the panacea to the world's problems.
But how realistic is the view that China can become a First World superpower to rival the United States? China has neither the infrastructure nor the muscle to compete with America in our lifetime. However, the Third World is crying out for a "superpower" of its own, and China fits the bill beautifully. In assuming this role, China just might be able to galvanize Third World muscle and help bridge many of the problems that constitute the First World-Third World divide.
FROM FIRST WORLD TO THIRD WORLD SUPER POWER
Before seeking to answer this question, one needs to step back and trace the roots of the words "super" and "power." "Super" stems from the Latin superus, meaning upper or superior. "Power" comes from the Latin potere, meaning the ability to do something. "Superpower" therefore suggests the superior ability to do something. But what "superior ability to do something" does China have vis-Ă -vis the United States? Outside of cheap labor, it would seem very little. However, China does possess clearly superior abilities when compared to its peers in the Third World. As a result of its economic division of labor with the rest of the Third World, and also thanks to its size, the United States (as well as Europe and Japan) listen to China far more than to any other Third World country or block. This ability to be heard by First World countries places China in the unique position of becoming the Third Worldâ€™s superpower.
The economic division of labor between China and the Third World rests on Chinaâ€™s need for raw materials produced in these countries. David Hale, who co-authored one of the two Foreign Affairs articles cited above, mentions some statistics that illustrate this point. Hale shows that, already in 2001, China accounted for the following percentages of global commodities consumption:
Iron ore: 31 percent
Platinum: 21 percent
Aluminum: 15 percent
Statistics provided by the global financial services firm UBS in its Commodities Connections of October 2003 shed additional light on Chinaâ€™s commodities demand last year. According to that report, China accounted for:
Copper: appx. 66 percent of increase in global demand
Lead: 15 percent of global consumption
Nickel: 45 percent of increase in global demand
Zinc: 18.7 percent of global demand
In 2001, China accounted for 6.4 percent of global oil consumption. And according to the International Energy Agency, China accounted for one-third of global growth in oil demand last year, overtaking Japan to become the worldâ€™s second largest oil consumer after the United States.
China needs commodities. Thus, it needs to make friends with the developing world. Meanwhile, the developing world needs money, which it can earn by selling commodities to China and subsequently buying goods from China. So China's division of labor with the Third World works in two ways--via trade and via direct investment.
The statistics with regard to trade are perhaps even more startling than those regarding commodity consumption. In the first ten months of 2003, China imported US$220 billion worth of goods from Asia and another US$12 billion from Latin America. That combined US$232 billion is almost seven times the amount China imported from North America. According to the Bloomberg newswire service, "Chinese consumers are now the biggest alternative for commodities and goods from Latin America and Asia." In October of 2003, China exported roughly half its goods to the developing world, while importing 64 percent of its goods from these same countries.
The story gets even livelier when we enter the realm of China's overseas direct investment. Chinese firms go abroad primarily to tap resources--but also in order to tap markets and cheap labor. Resource-based direct foreign investments by Chinese companies continue to grow. In 2002, China's Sinopec signed a US$525 million contract to develop the Zarzaitine oil field in Algeria's Sahara desert, with China National Oil and Gas Exploration and Development Company poised to build an oil refinery near Adrar, also in the Algerian Sahara. Chinese investments in Africa also include a US$350 million contract signed by China National Petroleum Corporation in July 2003 to import oil from Nigeria. In February of this year, China National Offshore Oil Corporation agreed to pay US$98 million to raise its stake in the Tangguh gas project in Indonesia, complimenting existing investments in Indonesian oil and gas fields by Petrochina. Finally, according to Bloomberg, China's biggest steel maker, Shanghai Baosteel and Brazil's Vale do Rio Docel, the world's largest iron ore producer, may cooperate in the building of a steel mill in northern Brazil.
China's need for Third World resources, coupled with the developing world's need for Chinese money, has produced a potent, win-win relationship. All the more so in that the United States will likely seek to bar China's access to natural resources in the future, thereby creating a natural ally for China in the Third World. China has no "superior ability to do something" to challenge the United States, but it certainly does have a role to play vis-Ă -vis the developing world. That role is leadership. China is in a unique position to help the Third World progress economically and politically by becoming the "gorilla" spokesman for the developing world against the United States and its tag-alongs, Europe and Japan.
By virtue of its size and commercial potency, China has the opportunity to become the developing world's spokesman. It is by no means original to suggest that China's appetite for commodities has to rise in line with increased industrialization. But what is behind this industrialization drive? Survival. Beijing knows that China cannot survive if it does not deliver. Bill Clinton's "It's the economy, stupid" could not be more relevant in corridors of power in Beijing today. Beijing needs the developing world in order to survive. Concomitantly, developing countries in Africa, the Middle East, Latin America and indeed in Europe desire a leader that will make their voice heard. China appears to be taking on this mantle. China has the character and the money to become not a Third World superpower but the Third World's superpower, thereby giving developing nations an ability to shape events in industrialized countries well beyond our imagination.
The implications of this development have the potential to be far-reaching, though not necessarily detrimental to the world political-economic system. While the First World should brace for a serious commodities fight, China's need for survival could actually create some stability in the developing world. As China trades with the Third World, the flow of money into these countries could produce some level of prosperity, thereby promoting peaceful, stable polities in developing regions. However, it is conceivable that the United States and its partners, with aging populations, may face a situation in which they find themselves fighting for resources against China and the Third World, which is full of resources and overflowing with bright, hard working young people anxious to get ahead. By galvanizing the developing world into one voice, China can place itself in opposition to First World economic superiority, thereby changing the face of the geopolitical landscape.
Mr. von Pfeil is chairman and CEO of Commercial Economics in Hong Kong.
This article appears on AFAR with permission from Jamestown Foundation, China Brief.