China Resource Demand Changes Economic Map
All Associated Press NewsSHANGHAI, China (AP) - China's huge hunger for energy and other resources needed to feed its juggernaut economy is creating a profitable bond with commodity exporters, helping to refashion global markets and trading alliances.
These burgeoning relations for China will be on display Wednesday when Australian Prime Minister John Howard inaugurates a 29 billion yuan ($3.6 billion) gas terminal in the southern city of Shenzhen.
The terminal was built to receive liquefied natural gas shipments from Australia -- part of a 25 billion Australian dollar ($18.3 billion) 25-year gas contract that was Australia's single biggest resource contract ever.
The benefits of a booming China for Australia go beyond gas. Sales of Australian of coal, farm products, iron ore and other resources drove a 46 percent increase in exports to China last year, to A$16 billion ($11.8 billion). China is now Australia's second biggest trading partner, after Japan.
Worried about keeping their economy steaming ahead, Chinese leaders are fine-tuning diplomacy and business dealings to try to lock up supplies of energy and raw materials -- from Africa to New Zealand. China's resource rush has helped fuel three years of robust global economic growth and contributed to a rise in commodity prices worldwide.
"Clearly the Chinese economy is the biggest source of growth in demand globally," says David Cohen, a regional economist for Action Economics in Singapore.
China is the world's biggest consumer of steel, grain, aluminum, cement, copper, iron ore and zinc, among other commodities. The price of copper on world markets has quadrupled in the past five years. Crude oil prices have jumped to around $70 a barrel this year, up from an average $25 in 2002, in part on the back of Chinese demand.
Worldwide, investments in mining and energy exploration are rising as is construction of infrastructure, from railways to ports, pipelines to LNG terminals to keep up with Chinese demand.
The Shenzhen facility, operated by state-owned China National Offshore Oil Corp. (CNOOC), is the first of 16 planned terminals in coastal China for receiving LNG. The plants convert the fuel from liquid into gas form, which is then piped to consumers, industries and power plants.
China's demand for natural gas is expected to rise 26 percent over the next five years, outstripping 17 percent growth in output. Crude oil demand is forecast to more than double by 2025, to 14.2 million barrels a day, from the current 7 million a day, according to the U.S. government's Energy Information Agency.
To sate the demand, China has been dispatching high-powered delegations to resource-rich nations across the globe, clinching deals worth billions of dollars, iron ore from Brazil, copper from Chile and crude oil from everywhere.
Helping Australia's Howard inaugurate the Shenzhen terminal will be Chinese Premier Wen Jiabao. He just returned from a seven-nation tour of Africa. One stop on his itinerary was Angola, which this year surpassed Saudi Arabia as China's biggest supplier of crude oil.
Two weeks ago, China played host to a regional security meeting that included some of the area's biggest oil suppliers, Russia, Kazakhstan and Iran among them.
China's robust relations with energy suppliers Iran, Myanmar, Sudan and other troubled regimes has prompted criticism from Washington that Beijing's resource hunt is undermining U.S. diplomacy and could skew global commodity markets.
Australia, long a stalwart U.S. ally, however, has not joined the criticism. Nearly half of its exports to China are farm products and other resources, and Canberra and Beijing are now discussing a free trade agreement -- something the U.S. and European Union have refused to do.
Apart from China's rising imports of Australian coal, copper and iron ore, the economy has benefited from an influx of Chinese students and from growing numbers of Chinese tourists. So far, trade friction with China has been minimal, though that could change as the two countries delve into the details of a free trade pact, he says.
"Australia and China are two of the most complementary economies in the world," said Malcolm Cook, program director for Asia and the Pacific at the Lowy Institute, an independent think-tank in Sydney. "There's not too much of a 'China threat' sentiment here."
© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
news.moneycentral.msn.com |
