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As resources get scarce, China is buying up world

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World, take note: China is on a massive spending spree to buy up increasingly scarce natural resources, and it's doing its shopping around the globe.

In her persuasive new book, U.S.-based international economist Dambisa Moyo argues that the spree is preparation for when resources are so scarce, a country's success will come down to how much of the world's arable land, water and metals it controls.

Moyo is a respected Harvard and Oxford University-trained economist, who is a regular contributor to publications such as The Economist and the Wall Street Journal. With previous books on the failure of aid in Africa and economic malaise in the western industrialized world to her credit, she has been called visionary and one of the most influential people in the world.

In Winner Take All, Moyo points out the pattern of the many purchases the Chinese have made in recent years in terms of natural resources. These purchases come on the heels of an unprecedented economic growth rate of 10 per cent each year over the last two decades. While the China's human rights record remains dismally outdated, the country's government has transformed its economy and the way its people live.

Moyo calls China this century's biggest growth story, and plants it firmly at the head of the BRIC countries -- Brazil, Russia, India and China.

She cites a Goldman Sachs study that projected these four emerging markets would be the top four out of five economies in the world by 2050.

China leads BRIC, and its economic transformation and subsequently its citizens' prospects has been extraordinary. If China continues on its extraordinary growth, Moyo states, it will become the world's largest economy by 2025.

Moyo uses poverty as an example. In the not so distant past, about 85 per cent of China's population lived in abject poverty. Today, that number is just 16 per cent -- startlingly close to the poverty level of 15 per cent in the U.S.

The result, says Moyo, is a vast increase in the middle class of emerging markets. Populations are shifting to cities, and demand for goods and services is skyrocketing. From better food, to high-quality housing, to transportation and technology, Chinese families and those in other BRIC members are now after the same trappings of success as their western counterparts.

The Chinese government has recognized this shift, Moyo writes, and is planning ahead to meet increasing demand and potential shortages. The leadership is never completely out of deals being made.

China employs a "going out" strategy, which encourages overseas expansion in key commodities by providing favourable government loans. The strategy enabled the Chinese government to stimulate business through the worst of the economic crisis in 2008, while western economies continue to languish.

Canada has not been immune to this way of doing business. In 2011, China's largest offshore oil, gas and natural gas producer, CNOOC Ltd., came calling to the Alberta oil sands with a $2-billion purchase. This as U.S. investors began a retreat from the oil sands based on both the economic downturn and pressure from environmentalists.

Winner Take All is a warning and a financial prospectus all in one. While at heart a book of facts and figures, it is a warning to western governments and a source of valuable information to investors about where to hedge the commodity dollar of the future.

 

A former foreign correspondent, Jackie Shymanski is the director of communications and public affairs at CancerCare Manitoba.

Republished from the Winnipeg Free Press print edition July 21, 2012 J9

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