Mainland has to pursue friendly foreign policy to ensure supply of commodities from around the world The past two months have been tense for citizens of Taiwan and Japan, with the passage of China's anti-secession law and weeks of demonstrations and attacks on Japanese property while the police looked on and did nothing. People in Taipei and Tokyo have been asking if China will use violence and war to achieve its political objectives. If they believe Beijing's rhetoric, they have every reason to lose sleep. But if they look closely at the figures that show how integrated China has become with Taiwan, Japan and the rest of the world, they have less reason to worry. The latest reminder of the mainland's dependence on other countries comes from Andy Rothman, China macro-strategist at CLSA, in a detailed study entitled 'China Eats the World'. He shows the mainland's insatiable appetite for key commodities, such as oil, copper and nickel. A conclusion drawn from his forecasts is Beijing has to pursue a pragmatic and peaceful foreign policy to ensure that it gets the resources it needs. Countries near and distant play a role, large or small, in providing raw materials, machinery and markets for the mainland's goods and services and contributing to the astonishing economic growth of the past 25 years. All this means that, while Mao Zedong had the independence to go to war with the United States in Korea and attack India and Deng Xiaoping could invade Vietnam in 1979, the current leaders find themselves in a dense web of investments, trade arrangements and financial obligations. Mr Rothman's report traces with painstaking accuracy how rapidly this dependence has come about. 'China's demand for most commodities - including steel, iron ore, nickel, copper, aluminium and oil - will grow at double-digit annual rates through the end of this decade,' he said. 'China will continue to drive global demand growth for almost all commodities. 'The end-use drivers behind this strong demand - housing and infrastructure, construction, consumption of appliances and autos and transportation of goods and people - underpin our forecast of 8 to 9 per cent GDP growth this year and 7 to 9 per cent annually through 2010. The Chinese dragon will stay very, very hungry.' The report cites astonishing figures. China's combined share of world consumption of aluminium, copper, nickel and iron ore more than doubled from 7 per cent in 1990 to 15 per cent in 2000. It has now reached 20 per cent and is likely to double again by 2010. China is the world's largest buyer of seaborne traded iron ore, with imports last year rising 40 per cent, compared with an increase of only 2 per cent in Japan, the world's second-largest market. Last year, the mainland consumed 46 per cent more copper than the US and almost three times as much as Japan, the world's third-largest consumer. Between 2000 and last year, imports of nickel rose a 100-fold. In 2003, China had a 10 per cent share of global nickel consumption but accounted for more than 100 per cent of global growth in consumption that year. Its level of oil import dependence reached 41 per cent last year, up from 12 per cent in 1995 and 36 per cent in 2003 and could rise to 60 per cent this year. All this means China has become the opposite of the country that Mao aimed to build when he took power in 1949 - self-sufficient and self-reliant, with no foreign debt and no foreign investment, giving him a broad independence in his foreign policy and allowing him, for periods during his reign, to export 'revolution' wherever he chose. Hu Jintao has the opposite problem. As he looks around the world, he sees a map in which Chinese firms have invested in a majority of countries ranging from Cuba, Brazil, Chile and Mexico to Kazakhstan, North Korea, Pakistan and Papua New Guinea and to Australia and Canada in their hunt for raw materials. One of his priorities is to guard access to these countries and ensure that his companies have the capital and equipment to exploit the commodities and the security and transport to bring them home. Plans to lead the developing countries and stop US 'hegemonism' must take second place when such economic interests are at stake. That is why China did not use its veto in the UN Security Council against the US invasion of Iraq and accepted US bases near its borders, in Afghanistan and Kyrgyzstan. That is also why the mainland supports a continued US military presence in Asia, because this helps maintain security in the Straits of Malacca, through which must pass China's oil shipments from the Middle East and Africa. Meanwhile, US troops in Japan mean that that country cannot remilitarise. Like the rest of Asia, Beijing needs Uncle Sam to be the policeman of the region. Another factor defining China's diplomacy is the need to court countries that offer the raw materials it needs. Friends who fall into this category include oil-rich Iran, Venezuela, Sudan and Burma. These countries are antagonistic to the US - making it easier for Chinese firms to access the oil and obtain better terms to exploit it. Even with Japan, doing business together is the best way to mend ties. Take the case of the disputed territories in the South China Sea. Beijing and Tokyo disagree over who has the right to drill for oil and gas in areas they dispute in the East China Sea and, in the past six months, have been sparring with each other. China sent a nuclear submarine into Japanese waters in November last year and Japan responded by inviting bids for drilling in the disputed areas last month. Joint exploration would be a more sensible way to solve the issue and heal scarred relations.
