- Off the remote north-east coast of Borneo, a Malaysian
patrol vessel hailed a suspicious looking trawler last week. When marine
police boarded, they found a catch of 160 dead giant leatherback turtles,
the most endangered of all sea turtles. The poachers, who had poisoned
the waters with cyanide, came from China's southern province of Hainan,
more than 1,000 miles away.
-
- That same day, stock markets across Asia and Europe shuddered
when the Chinese Premier Wen Jiabao - who arrives in Britain for a three-day
visit tomorrow - warned that he was taking "very forceful measures"
to slow China's runaway economy.
-
- "The coming slowdown in the Chinese economy should
be viewed as a global event," warned chief Morgan Stanley economist
Stephen Roach. "There is good reason to believe that the impacts of
a sharp slowdown in the Chinese investment cycle could spread well beyond
Asia."
-
- For better or worse, every ripple from this giant economy,
which is driven by the fast-expanding needs of 1.3 billion consumers, can
now be felt across the world. Without China, even the mighty US could not
run its huge trade and budget deficits. China is the world's second largest
buyer of US government debt, as it recycles a $124bn trade surplus with
the United States. No less significantly, the country's frenetic construction
boom is driving up world prices of nearly every commodity, while large-scale
foreign investment is powering a flood of exports which is bringing down
global prices for manufactured goods.
-
- Officially, China represents less than 4 per cent of
the world's economy. But its spectacular rate of industrial production
- which grew by 16.3 per cent last year alone - is making its effects felt
all over the world. Last year, China accounted for 7 per cent of global
oil consumption, 27 per cent of steel, 31 per cent of coal and 40 per cent
of cement. And its appetite for raw materials has been growing for years.
-
- Optimists are busy making plans on how to make money
by satisfying China's growing demand for timber, iron ore, copper, grain,
water, power, fish, meat, cars and everything else.
-
- Others fear the environmental consequences of unconstrained
growth. Last year, China added 1.8 million cars to its roads, bringing
the total to over 10 million. At recent growth rates, the number of cars
could double every three to four years.
-
- The world's top carmakers are rushing to build new factories
in China. Volkswagen announced last weekend plans for a new plant in China
to help it ramp up output to 1.6 million vehicles there by 2008. DaimlerChrysler
has just signed a Euro1bn contract to build a Mercedes-Benz car factory
in Beijing in the hope that current annual demand for 12,000 of the top
models will soon double.
-
- Yet were car ownership rates ever to match those in the
United States (135 million for a population of 270 million in 2002), then
there would be about 600m vehicles on China's roads, more than all the
cars in the world today.
-
- China's own environmental record is so lamentable that
if it were ever to import Western consumer habits, we might all suffer
the consequences. Imagine, for example, what would happen if coal production
were to double. China relies on coal for 75 per cent of its energy and
already spews out 19 million tons of sulphur dioxide a year, compared with
11 million tons for the United States. It would soon rival the US as the
world's largest source of greenhouse gases - although as a "developing
nation" China is exempted by the Kyoto treaty from cutting its carbon
dioxide emissions. The implications for global warming hardly bear thinking
about.
-
- Environmentalists point out that China's "ecological
footprint", though large and increasing, is considerably less per
head than that of either the US or the UK. Even now, however, the inhabitants
of roughly two-thirds of the 340 Chinese cities, where air quality is monitored,
breathe air that fails to meet national air-quality levels (which are considerably
less stringent than World Health Organisation norms). Indoor pollution
from coal burning takes more than 700,000 lives a year.
-
- Then there is water. Two thirds of China's major cities
are now seriously short of fresh water, and as many as 700 million people
drink water that is contaminated with human and animal waste and that doesn't
come close to meeting government standards (also below world norms).
-
- Most lakes and rivers are now heavily polluted; coastal
waters are plagued by red tides of algae. Fishing stocks are so exhausted
that Beijing has had to impose ever longer fishing moratoriums and to try
to cut the size of its fishing fleet.
-
- But it isn't just China that suffers. The North China
plain, home to 200 million peasants who used to grow half of China's wheat,
is drying up. The spring dust storms which swirl out of North China and
Mongolia are now depositing dust as far away as the US.
-
- As the water table falls, large areas of farmland will
be taken out of production and China will soon need food imports so large
they will dwarf existing world reserves. Wheat production has been falling
in China since 2000, and its once massive stockpiles of wheat and corn
have disappeared. World food prices are bound to rise as a result, causing
hardship for the 800 million people around the world who are already short
of food.
-
- China has so far succeeded only in exporting its environmental
problems. When a national logging ban was introduced following disastrous
Yangtze floods in 1998, timber imports from Burma, Thailand, Laos and Indonesia
shot up. Imports from Burma reached 1 million cubic metres in 2002 and,
according to the environmental organisation Global Witness, may have reached
1.4 million cubic metres in 2003. As a result, hundreds of square miles
of ancient tropical forests in Burma have disappeared.
-
- South-east Asia is also reeling under the impact of China's
plans to build dozens of new giant dams across the Mekong, the Salween,
the Irrawaddy, and the Brahmaputra. The Mekong River Commission, an international
body representing Cambodia, Laos, Thailand and Vietnam, made official protests
this year because the 4,500km-long river has seen record low flows since
January and strange and unprecedented fluctuations in levels. China's construction
of two large hydroelectric dams - the Manwan and Dachaoshan - is blamed.
Two more dams are under construction, while at least another four are being
planned.
-
- After protests in Thailand and Burma against plans to
build 13 hydro-power dams on the Salween River, China ordered one of the
dams to be cancelled. Sooner or later, however, all China's rivers will
be completely dammed. To keep its economy expanding, China needs some 800
million to 900 million kilowatts of electricity a year. Yet it currently
generates just 350 million kilowatts.
-
- In the past four years, China has gone from a surplus
of energy to a deficit so serious that even cities like Shanghai have had
to start rationing electricity. >From being nearly self-sufficient in
oil ten years ago, China is now the world's second biggest oil importer
- and is on the verge of needing massive coal imports as well.
-
- China is likely to realise plans to triple installed
hydroelectric capacity to 270,000 megawatts by 2020: 28 large-scale hydropower
projects are now being built, adding to 835 existing large hydropower plants.
Many are in the central Hubei, Hunan, Jiangxi and Anhui provinces where
power outages were frequent last year.
-
- Yet China's growing needs are also creating a boom for
its neighbours. Many are now busy investing in giant gas fields or long
oil pipelines to satisfy demand. Kazakhstan has said it will start building
a 3,000km oil pipeline to China from the Caspian Sea later this year.
-
- Moscow will soon declare a decision on a pipeline to
carry up to 20 million tons of oil each year from Siberia to China. And
most of Angola's oil exports now go to China.
-
- Chinese oil companies are planning big investments in
the Persian Gulf, while this year China National Offshore Oil Corp bought
Indonesian offshore reserves from Spain's Repsol YPF for $585m. To provide
more natural gas, China has turned to Australia. In 2002, an Australian-led
consortium and an Indonesian gas field operated by Britain's BP won contracts
to supply China with liquefied natural gas (LNG). This year ALNG, a consortium
led by Australian energy giant Woodside, won a 25-year deal worth up to
$13.5bn to supply an LNG terminal in China's Guangdong province while Indonesia
will supply LNG for a proposed second terminal.
-
- China's construction frenzy has fuelled a sustained rally
in world commodity prices. It all started after the Asian financial crisis
in 1998 when Beijing feared a wave of social unrest. The fires were fanned
again last year during the Sars epidemic, when the economy looked like
it was heading for a contraction until the government stoked lending to
encourage a new wave of mass construction.
-
- Although Chinese leaders are now busy trying to organise
a "soft landing" for an economy which saw a 43 per cent jump
in fixed-asset investment in the first quarter of the year, they may find
it hard to put the genie back in the bottle.
-
- China has doubled its steel output since 2000, with half
being used in construction. It is now the world's largest producer by a
wide margin, but capacity will double again in the next three years. The
pace of spending on new steel mills tripled from 2002 to 2003, making a
world-wide glut more or less inevitable.
-
- Many countries, including Australia and Brazil, are gambling
on the belief that the music will not stop. Rio Tinto has just said that
it will rush ahead to open a new mine in central Queensland, Australia,
to export 5.5 million tons of coking coal a year to China. BHP Billiton
is expanding cooper output at its mines in Chile, and spending $1.4bn on
developing a new nickel deposit in western Australia.
-
- Other companies are preparing to invest more than $5bn
to upgrade Brazilian ports and railways, in order to handle a surge in
deliveries of iron ore and soya beans to China. China has suddenly become
Brazil's third-biggest single export market after a 51 per cent jump in
trade last year.
-
- Meanwhile, South Korea's exports to China expanded 48
per cent last year, accounting for 80 per cent of the country's $15bn trade
surplus, and most of its recent economic growth. Much of the trade is in
parts for processing into manufactured consumer goods that are destined
for the US.
-
- The growth of China's foreign trade has also breathed
new life into the world's ailing shipping industry, with tanker rates tripling
over the last two years. Thanks to Beijing, the shipping industry is now
running at full capacity.
-
- But the boom will surely have to end sooner or later.
When it does, the world is likely to be left with vast overcapacity in
steel and cars - just as the previous boom left China producing too many
TV sets and motorbikes, now being dumped on world markets.
-
- By then, however, enough fortunes will have been made
in China to create a new surge in demand for high-priced luxuries, from
Armani suits to sea turtles. In Borneo or Milan, the China effect is likely
to carry on being felt for some time yet.
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- © 2004 Independent Digital (UK) Ltd http://news.independent.co.uk/world/politics/story.jsp?story=519237
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