The China National Offshore Oil Corp's US$15.1 billion takeover bid for Canadian oil company Nexen announced on Monday is not, as many media have been reporting, China's largest attempted overseas acquisition. That title goes to the US$18.5 billion bid that CNOOC made in 2005 for US energy company Unocal, although that deal failed to go through, scuppered by political opposition in Washington (in 2010 an even bigger attempt by Sinochem to buy Canada's Potash Corp failed to get the green light from Beijing). But if the bid for Nexen is approved, it still won't be China's, or even CNOOC's, biggest announced foreign investment. In October 2009, CNOOC said it would acquire 23 Nigerian oil licences in a deal estimated to be worth at least US$30 billion, although at the time the South China Morning Post did question the true value of the deal. Even so, CNOOC's latest acquisition attempt is a biggie, and it's just the latest in a long series of foreign investments by China aimed at securing future supplies of commodities. Some observers detect a sinister motive behind these investments. Others argue they have generated massive wealth in the recipient countries, many of which are in impoverished sub-Saharan Africa. Yet everyone agrees they have transformed the global market in natural resources over recent years. Among the latest to examine China's hunt for foreign supplies of vital commodities is Dambisa Moyo. The Zambian economist, a former World Bank and Goldman Sachs staff member, first hit the headlines back in 2009 with her book Dead Aid, in which she argued that development aid from the rich world does more harm than good in Africa. Her arguments weren't exactly new. African politicians had been making the same case for years. But for many well-meaning Western liberals, her book came as a deeply unwelcome shock, guaranteeing her subsequent works a big following. Now, in her new book Winner Take All, Moyo has turned her attention to China's hunger for resources and what it means for the rest of the world. She argues that China's investments in resource-rich parts of Africa have clearly been positive for local economies, providing much-needed infrastructure and creating many thousands of local jobs in areas suffering high rates of unemployment. But her longer-term view is darker. China, she believes, is the only major industrial economy to appreciate that the world is facing a tightening resource squeeze. Beijing has anticipated scarcity by securing supplies through its heavy foreign investments. But other countries have neglected to make adequate preparations. As a result, the inevitable run-up in commodity prices will erode living standards and heighten the danger of future wars over the world's limited resources. Happily, many of the assumptions underpinning her reasoning look questionable. In essence, Moyo is repeating the arguments of 18th-century clergyman Thomas Malthus, who maintained that while populations rose exponentially, food supplies could grow only in a linear fashion. As a result, he concluded that material advances were impossible, and that unrestrained reproduction must inevitably lead to famine, war and extinction. Recent years have proved him wrong. Although the world's population has doubled since the late 1960s, food production has increased at an even faster rate. Today, the world is better nourished, and more cheaply fed relative to incomes, than at any time in history. Similarly, there is little sign of the shortages Moyo fears in other commodities. Pessimists have been warning for decades that the world's oil supplies are running out. But the opposite is true. In 1980 the world's oilfields were reckoned to hold 30 years of proven reserves. Since then our annual consumption has leapt 45 per cent. However, thanks to technological advances, today we have enough proven reserves to last another 50 years. Today more people than ever drive cars, own fridges and carry mobile phones, and the world is producing more steel, aluminium and copper than ever before to meet their demand. Scarcity has not proved a great problem. As demand increases and commodity prices rise, engineers find new ways to achieve the same results with fewer materials. For example, it would have been possible to build the equivalent of an iPhone from the components available in 1986, but you would have needed a fully loaded articulated lorry weighing 40 tonnes to carry it around. Today's iPhone weighs just 130 grams. That's a 300,000 times improvement in material efficiency. As a result, whatever problems the world's population is likely to face over the coming decades, a shortage of resources is unlikely to be among them. That's good news, but it does make you wonder if bids such as CNOOC's for Nexen are as commercially and strategically compelling as Beijing - or Dambisa Moyo - seems to believe.
