How China is eating the world

Posted on November 26, 2007. Filed under: Uncategorized |

People grumble about the price of bread and the gasoline, but they should also be aware that nations emerging from poverty – China, India, Brazil – are exacting a heavy price on those left behind.
  • The world is seeing some dairy prices up 200%, the cost of wheat doubling and pork up 50 percent.
  • In the past decade alone, meat consumption in China has been rising at an average of 2kg per capita a year. Over the past few decades, consumption of meat in developing countries has grown at a rate of 5 percent to 6 percent a year; with consumption of dairy products at 4 percent.
  • Meat consumption is growing 10 times faster in newly industrialised countries than in, say, bacon-loving Britain.
  • Poultry is the fastest growing sector worldwide: it represented 13 percent of meat production in the 1960s, compared with 28 percent now.
According to the International Monetary Fund (IMF), about half of the world’s economic growth this year will be accounted for by Brazil, Russia, India and China.

India, staggeringly, is contributing more growth to the world economy than the United States, but China is by far the most powerful engine of growth – more so than the US, the eurozone and Japan combined.

So, “China saves the world” – or at least helps to maintain global economic growth around the 5 percent mark. Were it not for China and these other emerging economies, the world might well be staring a recession in the face.

Yet this phenomenon is not an unalloyed economic good. As recent news about Rio Tinto and BHP demonstrates, the commodities price boom has led to huge valuations for companies in this field; great for their shareholders, but another signal that the insatiable Chinese demand for oil, copper, zinc, nickel and all the other raw materials of industrialisation is pushing the prices of those commodities to ever-higher peaks.

The International Energy Agency (ING) has warned that Chinese and Indian crude oil imports will almost quadruple by 2030, creating a supply “crunch” as soon as 2015.

Research from ING suggests that marginal Chinese demand for oil, as a percentage of the growth in total consumption, rose to around 72 percent in 2006, from 10 percent in the 1980s. This marginal demand could grow to close to 100 percent of total consumption growth in 2007.

Such an appetite brings with it its own dangers, both to China and the rest of the world. As China pushes the price of oil higher, for example, the UK is threatened with “slowflation” – where a slowing economy co-exists with higher prices of fuel – and food.

In January, President George Bush pledged a biofuel target of 20 percent of US fuel consumption within 10 years. This means more of America’s corn harvest being put into the tanks of cars rather than the bellies of Mexicans, with upward effects on the price of grain.

“The 35-billion gallons of ethanol required to meet the 20 percent target will account for 40 percent of the US corn crop by 2017,” Garthwaite says.

Worldwide, “the combined impact of these targets commits 96-million hectares or 12 percent of global arable and permanent cropland to biofuel production”.

Read more from Source & Copyright, Sunday Tribune –  Original URL

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