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08/19/2004

China's Boom

[Next Hott Spotts September 2.]

You can never learn enough about China’s impact on the world
economy these days. The following is gleaned from a piece
titled “China’s Growing Appetites” by economist David Hale in
the summer 2004 edition of The National Interest.

---

China’s industrial production has been running at an 18%
annualized clip. [Though as I reported in my “Week in Review”
column, more recently it’s in the 16% range.]

China’s share of world exports is 6% and will soon pass Japan.

The investment share of GDP is now approaching 45%, highest
in the world. This is creating excess capacity meaning
profitability will eventually decline.

China’s imports of iron ore were 14 million tons in 1990. The
figure was 148 million in 2003.

Aluminum imports grew from 1 million tons in 1990 to 5.6 mm
in ’03. [Now 21% of global demand vs. 20% for U.S.]

Refined copper imports rose from 20,000 tons to 1.2 mm over
the same period. [20.6% global demand vs. 16% U.S.]

Platinum imports grew from 20,000 ounces in 1993 to 1.6
million ounces in 2003.

China accounts for 35% of global coal production, 20% of zinc
output.

China’s steel production of 220 million tons per annum is more
than the U.S. and Japan combined, yet China is still importing 40
million tons. China’s steel companies are also planning to add
another 200 million tons of capacity over the next few years.
The stock market capitalization of China’s steel companies is
$41 billion compared to $11 billion for U.S. [Japan is $50
billion.]

China is still just 40% urban and 60% rural (despite all the mega-
cities you read about) and there remains huge pent-up demand
for steel to build new cities and expand existing ones.

China consumes six times as much cement as the U.S.

Because of rising domestic demand, exports of coal are falling
and China is now importing certain types.

China has 54% of world’s manganese reserves, 23% lead
reserves, 22% silver, 12% coal, and 6% of copper reserves.

China is likely to continue to import food. The nation is trying to
feed 20% of the world’s population on 7% of its arable land.
China employs 370 million people to produce as much as 2 mm
American farmers do. There are serious water shortages; 4/5s of
water in the south, while 2/3s of cropland is in the north.
Diversion of rivers to cities hurting as well.

After expanding its grain harvest from 90 mm tons in 1950 to
392 mm tons in 1998, China’s harvest has fallen in four of the
last five years. [Down to 322 mm tons in 2003] Production of
rice and corn has declined. The World Bank estimates China’s
net grain imports will rise to 19 mm tons in 2010 and 32 mm
tons in 2020. [U.S. officials say 57 mm in 2020.]

China’s oil demand is approaching 8 mm barrels per day,
displacing Japan as the 2nd-largest consumer. [This figure has
been constantly adjusted upward by the experts throughout
2004.] In 2003 the figure was 5.49 mmbd. China is expected to
import 2.5 mmbd in 2005, while making plans to import large
quantities of liquid natural gas from Australia, Indonesia and
Iran. Demand for oil is being driven by industrial boom and
rapid growth of car ownership, the latter now running at a 2
million per annum clip. Autos could account for 40% of China’s
oil consumption in six years compared to only 10% in 1995.

Chinese companies are aggressively scanning world for new
sources of raw materials. For example, the world only has 85
years of bauxite, 55 years iron ore reserves, 14 years of copper,
11 years of zinc.

Of course when you look at some of the above, you can see why
I often talk of war in Asia being inevitable; a battle between
Japan and China, for example, over shrinking natural resources.
There are also more than a few hints of a bubble in the Chinese
economy.

Hott Spotts will return September 2.

Brian Trumbore


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-08/19/2004-      
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Hot Spots

08/19/2004

China's Boom

[Next Hott Spotts September 2.]

You can never learn enough about China’s impact on the world
economy these days. The following is gleaned from a piece
titled “China’s Growing Appetites” by economist David Hale in
the summer 2004 edition of The National Interest.

---

China’s industrial production has been running at an 18%
annualized clip. [Though as I reported in my “Week in Review”
column, more recently it’s in the 16% range.]

China’s share of world exports is 6% and will soon pass Japan.

The investment share of GDP is now approaching 45%, highest
in the world. This is creating excess capacity meaning
profitability will eventually decline.

China’s imports of iron ore were 14 million tons in 1990. The
figure was 148 million in 2003.

Aluminum imports grew from 1 million tons in 1990 to 5.6 mm
in ’03. [Now 21% of global demand vs. 20% for U.S.]

Refined copper imports rose from 20,000 tons to 1.2 mm over
the same period. [20.6% global demand vs. 16% U.S.]

Platinum imports grew from 20,000 ounces in 1993 to 1.6
million ounces in 2003.

China accounts for 35% of global coal production, 20% of zinc
output.

China’s steel production of 220 million tons per annum is more
than the U.S. and Japan combined, yet China is still importing 40
million tons. China’s steel companies are also planning to add
another 200 million tons of capacity over the next few years.
The stock market capitalization of China’s steel companies is
$41 billion compared to $11 billion for U.S. [Japan is $50
billion.]

China is still just 40% urban and 60% rural (despite all the mega-
cities you read about) and there remains huge pent-up demand
for steel to build new cities and expand existing ones.

China consumes six times as much cement as the U.S.

Because of rising domestic demand, exports of coal are falling
and China is now importing certain types.

China has 54% of world’s manganese reserves, 23% lead
reserves, 22% silver, 12% coal, and 6% of copper reserves.

China is likely to continue to import food. The nation is trying to
feed 20% of the world’s population on 7% of its arable land.
China employs 370 million people to produce as much as 2 mm
American farmers do. There are serious water shortages; 4/5s of
water in the south, while 2/3s of cropland is in the north.
Diversion of rivers to cities hurting as well.

After expanding its grain harvest from 90 mm tons in 1950 to
392 mm tons in 1998, China’s harvest has fallen in four of the
last five years. [Down to 322 mm tons in 2003] Production of
rice and corn has declined. The World Bank estimates China’s
net grain imports will rise to 19 mm tons in 2010 and 32 mm
tons in 2020. [U.S. officials say 57 mm in 2020.]

China’s oil demand is approaching 8 mm barrels per day,
displacing Japan as the 2nd-largest consumer. [This figure has
been constantly adjusted upward by the experts throughout
2004.] In 2003 the figure was 5.49 mmbd. China is expected to
import 2.5 mmbd in 2005, while making plans to import large
quantities of liquid natural gas from Australia, Indonesia and
Iran. Demand for oil is being driven by industrial boom and
rapid growth of car ownership, the latter now running at a 2
million per annum clip. Autos could account for 40% of China’s
oil consumption in six years compared to only 10% in 1995.

Chinese companies are aggressively scanning world for new
sources of raw materials. For example, the world only has 85
years of bauxite, 55 years iron ore reserves, 14 years of copper,
11 years of zinc.

Of course when you look at some of the above, you can see why
I often talk of war in Asia being inevitable; a battle between
Japan and China, for example, over shrinking natural resources.
There are also more than a few hints of a bubble in the Chinese
economy.

Hott Spotts will return September 2.

Brian Trumbore