Our Fire-Spewing Neighbour Dragon

dragon.jpgChina’s economy is hungry and is growing hungrier by the day. The country accounts for a fifth of the world’s population but it consumes nearly half of the world’s produce of cement and pork, a third of its steel and over a quarter of its aluminum. The world-over rise in oil prices can be attributed to the continuous increase in demand of oil by the developing countries, primarily China. Indeed, the consumption of petrol in the United States is declining. On the contrary, according to the International Energy Agency, China’s imports of oil might triple by 2030. Furthermore, the demand for resources by China is driving the developing economies around the world; African and Latin American economies are growing at their fastest pace in decades.

The prices of all kinds of fuels, metals and grains are touching new peaks, thanks to the growing demand of the developing nations. Yet, China’s growth is posing problems for the world too. It is being argued that the Chinese are in a race to win over physical resources to feed their continuously growing economy. Some of the Non Governmental Organizations worry that in the rush to secure resources, the Chinese firms will ignore environmental, legal and labour standards and leave behind a trail of corruption and environmental pollution.

The Chinese government is providing big aid packages to countries which welcome Chinese investment. For instance, Angola is receiving so much monetary incentive from China that, in 2006, it refused the aid given by International Monetary Fund (IMF). It must be noted that a pre-requisite for aid by IMF is having transparency and sound economic management.

The West has vocalized its concern on the way the Chinese are moving ahead. One obvious reason that comes to the fore is that the West is “losing” Africa and its resources, definitely not pleasant for them. The backlash of this unpleasant idea has come in the form of criticizing the way in which China is operating. As a Western critic put it, “Washington consensus of economic liberation and democracy will find itself in competition with a Beijing consensus of state-led development and despotism.” However, the Western companies themselves are no better than their Chinese counterparts are. Several years of American and European aid and investment could not do much for Africa. A different approach from China might just work. At least it will challenge other donors to find methods that are more effective.

All the hue and cry about the repercussions of China’s activities are dissolved in the face of the effects that China has to bear back home. Its appetite is increasing not only because of the rapid growth of the economy but also because Chinese growth is concentrated in industries which require a lot of raw materials. Moreover, over the past few years, there has been a marked shift from light to heavy industries in the country. Therefore, for each unit of output, more raw materials are required. This, in turn, is accentuating China’s already grim pollution problem. Also, heavy industries require huge amounts of power. Steel making, for instance, uses up to 16 per cent of the total power in the economy against a total of 10 per cent used by households. These factors are acting as drags for the economy. Pollution costs borne by the society in the form of increased medical expenses, loss of productivity due to thousands of premature deaths and lower crop yield together make up for 10 per cent of the GDP of the Chinese economy. Authorities are struggling to ensure clean air for the athletes slated to participate in the Olympics in Beijing this summer. China needs to self evaluate its policies to see where it is headed. The efforts to temper the economic growth, to avoid over heating of the economy and to follow a path of sustainable development have to be evaluated and approached again. Otherwise, China will spiral into a less prosperous, a more unstable and a completely unsustainable place.

Himadri Agarwal

[Image Source : http://www.flickr.com/photos/eilard/281206368/]