China’s quest for resources
When it comes to undertanding our resource exports, Australia has a patchy perspective.
Banner headlines like ‘China’s bid for nuclear supplies: Australian uranium sought’ (The Sydney Morning Herald, April 22) attract a lot of attention these days.
Most Australians react positively, recognising the benefits for our national accounts at a time of global economic stress. Understandably, the issue of Chinese ownership of key resource deposits is raised in the next breath. Nothing wrong with that, though it’s usually to the exclusion of reporting and debate on the broader China picture. Regardless of what we sell to that country, there’s much more to what China’s doing than just our relationship with it.
If we had a more holistic appreciation of those other dimensions we might also have a more realistic awareness of where we fit in and why we need to knuckle down in this country and do some solid national planning. The ad hoc approach we take to such matters simply isn’t the stuff of national survival.
Take China’s policy on rare earth metals, for example.
"Why ever would we want to do that?" most Australians would query? "Don’t we have more important things to worry about?"
Well, people running strategic industries around the world might say that if you ask that question you’ve already lost your grip on the future. They know that the seventeen elements involved here are used in things like mobile phones, lasers, wind turbines, hybrid cars, environmental technology and a wide range of new generation consumer electronics. And they’re concerned because China is on the verge of triumphing in its mission to become the ‘ultimate monopolist’ in supplying such materials. After a carefully planned and unrelenting campaign of price wars and reductions in export quotas, more than 95% of global supply is now produced in China.
Worldwide demand is rising by 10% a year and China has the resources (nearly 60% of all reserves) and the refining capacity to satisfy this. But its export allocation for this year is around 38,000 tonnes, which is less than Japan’s total requirements. One expert sums it up this way: "Deng Xiaoping’s comment in 1997, where he said that China would be for rare earth metals what the Middle East was to oil, has become a stark reality. The world has to wake up and start thinking of this group of elements as ‘technology metals’ without which there will be no technology. China is already working out how these metals are going to give its companies a competitiveness that the rest of the world will find very difficult to match."
In effect, China has priced other refiners out of the market, which not only gives its own hi-tech industries breathing space to flourish, but will probably also force foreign companies to move their R & D centres and hi-tech manufacturing plants to China.
Oh, and it’s useful to note that earlier this year the Chinese acquired a 25% share in Australian rare earth miner, Arafura Resources. And that company’s deposits are top quality.
Interestingly, on the same day that The Sydney Morning Herald ran its front-page article on uranium exports, tucked away in The Australian‘s Higher Education Supplement (on page 39) was a worthy article on how the economic powerhouse of China is adapting to its status as an important player in science and innovation. Written by Mark Dodgson, director of the Technology and Innovation Management Centre at the University of Queensland’s business school, it highlighted how national R & D spending in China has increased by about 20% annually since 1999.
He explains how the transformation of science and innovation that China has experienced over the past two decades has come from strong political leadership. This is what’s put China up there with the United States in the work it has done on nanotechnology. Now there’s a huge part of the future we’re about to slam into.
While Australia needs a constructive debate on foreign ownership, it’s hardly worth having unless it’s part of a much broader examination of where we think we want to go, how we’re going to get there and our chances of survival along the way.
Warren Reed has spent 40 years involved in Asian economic development. He was in intelligence for a decade and later, for three years, was chief operating officer of the Committee for Economic Development of Australia (CEDA).
sally.rose
April 23, 2009 at 1:23 am
Are some fears still well founded?
Hi Warren
It's interesting to me that in your blog you don't even mention what I percieve as the average Australian's fear about selling Uranium to China – not foreign ownership – but a fear of empowering our neighbours with the resources for increased nuclear armament.
I must admit, I do fear that China lacks the standards and regulatory checks and balances neccessary for us to be able to rest easy that nothing bad will happen with the uranium which they import from Australia. Personally, the fear of an industrial disaster looms larger in my mind than the fear of Chinese nuclear weapons.
Do you think this is unfounded?
Warren Reed
April 25, 2009 at 6:35 am
China’s Quest for Resources
Thanks Sally. Yes, the issues you raise are important but I deliberately chose not to deal with them in my article because they take up a lot of space and I wanted to examine other dimensions. While concerns over a possible industrial/nuclear accident in China are well-founded, I don't think that they're necessarily any greater than anywhere else. After all, the Chinese want to avoid such an accident as much as we want them to. Warren.