Jia Yu Guan Iron and Steel Company, 1983. PHOTO BY JOAN LEBOLD COHEN.
China has extensive mineral resources that are critical to the development and success of a modern, economically diverse economy. As China increases foreign exports and domestic consumption of these resources, more attention must be paid to exploiting these resources in a sustainable fashion.
The huge size of China—nearly 9.6 million square kilometers—anticipates the considerable diversity of geologic and landform genesis processes that ultimately must be credited for the nation’s rich and extensive mineral resource base. As a consequence of the geologic forces (metamorphic, sedimentary, and igneous) that create and concentrate exploitable subsurface mineral resources under different environmental conditions over millions of years, the country has some of the most extensive mineral deposits on Earth.
China is at or near the top of the list of all nations in gross potentially exploitable reserves of many strategic metals and ores. For example, China in 2007 was first among all nations in the production of coal, crude steel, fertilizer (phosphate, potash), and chemical fibers. China is also among the world’s four top producers of antimony, magnesium, tin, tungsten, and zinc, while ranking second in the production of salt, third in gold, fourth in silver, eighth in lead, and approximately sixth in crude petroleum. Uncertainty about the supply of crude petroleum underscores a number of common problems in the estimation of energy resources and reserves, since exploration is ongoing while domestic production varies significantly from year to year in response to the price of imports vis-à-vis domestic production costs.
Nevertheless, China’s diverse and extensive strategic mineral resources, exploited at ever-growing rates, guarantee that the nation will be a major player, as both an importer and exporter, in the global trade in many strategic minerals for the foreseeable future. Concerns among the international community tend to focus on the growth of China’s imports of energy resources, especially oil and natural gas, steel, gold, and silver, because of the effect these imports are already having on global markets and prices. Overlooked, however, is the fact that the country is an increasingly important exporter of raw and semiprocessed minerals as well. China’s leading export minerals include tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.
China’s extensive in-ground reserves and growing production of minerals and ores reflect only part of the story. But if China’s resources are evaluated on a per capita basis, concerns expressed by both domestic economic planners and the international community regarding current consumption levels and projected future shortages of metals and energy are more understandable. Per capita amounts of many of the same minerals and ores listed earlier are often quite low because of the nation’s population of 1.33 billion (2008). China’s population is projected to increase at least for the next quarter-century, while per capita consumption of energy and industrial metals or ores during this same period is expected to continue to skyrocket because of China’s racing economy—still predicated largely on manufacturing. This situation, then, is an important point of departure in considering the nation’s reserves and contemporary use of important mineral resources. What is important is not simply how much a nation potentially has available in absolute terms, but rather how many people are dependent on the reserves as they move from the ground via manufacturing processes to the marketplace.
Indeed, realization among China’s top leaders that the nation’s economic growth will slow or stagnate without adequate supplies of industrially important minerals and nonrenewable organic sources of energy (coal, natural gas, petroleum) has prompted startlingly different foreign policy initiatives and “alliances” during the last decade. Despite the indisputable logic of such a pragmatic diplomacy, many in the international community have been taken by surprise by the pace and extent of China’s new roles on the international stage. Seldom can international trade and diplomacy be separated, and nowhere is this truer than in contemporary China. Foreign policy initiatives include controversial bilateral agreements with oil-rich nations such as Sudan, Iran, and Venezuela, but more important and potentially enduring are efforts to forge closer relations (and build pipelines) with Russia and other central Asian nations such as Kazakhstan. Furthermore, mutually beneficial aid-based diplomacy throughout Africa has placed Chinese engineers and construction teams in dozens of African nations. Chinese nationals are now routinely found building roads, irrigation systems, and dams as well as operating mines under contract and as joint ventures throughout the continent and more recently in many places in Southeast Asia. It should come as no surprise that many of these same nations are exporting growing volumes of ores and minerals (including organic fuels) to China while also serving as export markets for Chinese manufactured goods. An assessment of China’s mineral reserves, use, and consumption then must be viewed not as a set of arcane facts but rather as a critical factor influencing China’s international diplomacy actions and initiatives as the nation’s role in the global economy grows.
The Global Workshop
Since market-oriented economic reforms were instituted in December 1978, China’s economy as measured by gross national product (GNP) has grown at or near double-digit rates. Mineral resource use then is being driven both by increases in domestic consumption of energy and manufactured goods and by the nation’s more recent and expanding role as the “global workshop.” This remarkable increase in productivity fuels the use of domestic supplies of ores, metals, and energy resources at expanding rates. As the role of centralized planning in mining and metallurgy firms declines, prices, production, and consumption of strategic metals and energy resources are increasingly determined by international market prices—not by domestic availability.
For many heavy industrial firms, central planning once exclusively determined the sources of metals and energy used in production, and prices for these materials were set by the government. Increasingly the international price of these commodities determines if imports or domestic supplies are used by these same firms. This is not to say that the role of the state with respect to the management of mineral resources has diminished anywhere near the extent found in Western nations or Japan and South Korea. Domestic prices are still controlled by state-established “ceilings and floors,” and markets for many minerals and metals used in manufacturing are allowed to fluctuate only within this range. Although most light manufacturing firms have already made the transition from state-owned enterprises (SOEs) to diverse forms of private ownership (private, publicly traded, joint ventures), the government has moved more cautiously in the case of mines, metal-processing and smelting companies, and energy-related firms. For example, crude petroleum markets are controlled almost exclusively by state-owned megafirms. Coal, on the other hand, is produced both by state-owned firms (including local government-owned firms) and private operations. Subsidies are still provided for state- or local-government-owned mines, smelting operations, and other processors, but t
hese are now determined on a case-by-case basis as the country works to close inefficient and/or dangerous mines and processing plants. Clearly, however, the privatization of these operations is under way, with a growing number of firms—especially new ones—being encouraged to operate as private enterprises based on shareholding, even when local or provincial government monies are involved. Ironically, many of the most dangerous mines are privately owned or owned by local governments, and the central government now finds itself in the uncharacteristic role of “protector of the working man,” trying to close dangerous small mines while facing resistance by local governments dependent on these revenues.
Typically mineral resources are grouped into three categories: energy resources, ferrous metals and ferroalloys, and nonferrous metals and minerals. (See table 1.) Extensive scientific resource surveys for all three categories initiated in the mid-1980s and conducted almost continuously since that time have resulted in much clearer assessments of mineral resources than at any other time in the nation’s long history.
China’s growing industrial might and its increasing production and consumption of minerals and industrial metals such as copper, iron, and tungsten are already having myriad impacts on global markets. A poignant example is the fact that prices for scrap steel (heavy melt scrap)—essentially flat in the United States for the preceding decade—almost tripled to $225 a ton from 2001 to 2007 on the back of massive increases in exports, with 50 percent of these exports going to China. This is good news for scrap yards but bad news for U.S. steel manufacturers who depend on scrap as a component in new manufactures, including automobiles and consumer durables such as appliances. A new industrial lobbying group representing metal processors in the United States was formed in 2000 in response to the instability that the growing economies of China and India have visited on prices and availability of scrap metal.
|FERROUS ORES AND ALLOYS||TONS|
|NONFERROUS AND NONMETAL RESOURCES||TONS|
|Source: National Bureau of Statistics of China. (2006).|
Fossil Fuel Reserves
Nothing can be processed or manufactured without energy, and China’s growing participation in global energy markets has caused the greatest concern and greatest impacts to date on global markets. Simply put, China’s domestic reserves of fossil fuels are quite modest when compared with current and future domestic demand. Estimated oil reserves—although still changing because of ambitious exploration efforts often conducted jointly with international firms—range between 20 and 30 billion barrels. Estimated consumption is growing from about 5 percent to 7 percent per year (depending on the source), meaning that in twenty years or so China will be out of domestically produced oil. New technologies will extend this timeline slightly, but China will be one of the top two U.S. major petroleum buyers within a decade, and as noted earlier China has adopted a series of ambitious foreign policy initiatives directed at assuring supplies in anticipation of this demand. In addition to these political solutions, petroleum and natural gas exploration, especially in far western Xinjiang and the South China Sea, is a government priority. Shallow areas thought to have significant reserves within the South China Sea, such as areas around the Paracel and Spratley islands, are claimed by many nations, including Vietnam, the Philippines, Brunei, Malaysia, and Taiwan. These multiple claims represent important barriers to production from these areas—even if greater deposits are identified.
In contrast to petroleum (vital for transportation), China has massive coal reserves, typically considered to be third behind those of the United States and Russia. Coal reserves are estimated to be 120 billion tons, which—at current rates of consumption—will last almost one hundred years. Of course, the dilemma in China as elsewhere is how to burn the coal cleanly and more efficiently and how to convert the coal to fuels that can be used for transportation.
Given expected shortages, the current high costs of coal conversion, and the political issues related to increased crude oil production, it should come as no surprise that China is investing heavily in nuclear power, hydropower, and alternative energy. Historically unprecedented hydropower dam construction, including the recently completed and controversial Three Gorges Dam, must be viewed in this context. Wind farms are increasingly common off the eastern coasts and in Xinjiang and Qinghai in the far west. Zoning and local resistance limit the growth of wind-generated energy in the United States, but, for a nation whose citizens must routinely accommodate cut-offs or partial brown-outs, having the lights go on when the switch is flipped is worth the loss of the “view.” Although all of these alternative efforts will undoubtedly help mitigate energy shortages, new technologies focused on converting coal to liquefied gas and an ambitious program for nuclear power plant construction are probably more important in the short to medium term of the next twenty years.
Distribution of Resources
The distribution of China’s mineral resources has an interesting “geography” that has had direct and enduring effects on the nation’s economic development. Except for a limited number of elements or compounds largely concentrated by sedimentary deposition or fluvial redistribution in basins, such as bauxite, salt, natural gas, coal, and petroleum, most ores and minerals are found in mountainous areas—as is the case in all nations. The massive heat and pressure generated through metamorphic and igneous processes work to concentrate ores and minerals into commercially exploitable deposits. Mountains and minerals then are closely associated. Most of China’s mountains are located in the western and central regions of the nation; as a consequence, so are most of China’s mines and commercially exploitable mineral deposits, although there are important exceptions, such as iron.
But the vast majority of the country’s popula
tion is concentrated in the large and rich alluvial areas of the east and southeast coasts or in the Sichuan Basin (Red Basin). In part the high population density in these areas is testimony to China’s agrarian past, but on all the continents people tend to concentrate within flat, well-watered coastal areas where transportation and the construction of cities are easier. This was true even before the global mercantile era began but is even more true since. Pacific maritime trade became vital to China’s economy from the Song dynasty (960–1279) to the present (albeit with a few interruptions during the dynastic era). Of course, greater concentrations of people resulted in greater concentrations of capital and wealth, which in turn meant that the lion’s share of the factories of all types that emerged during the past 150 years were largely located in these areas as well. This fact resulted in what might be thought of as a locational mismatch in which mineral and ore deposits are concentrated in the interior, whereas the firms that process these resources are most often located within the more prosperous eastern region. Massive investments in transportation (road and rail), especially since the Great West Development Plan was instituted in 2000, can in part be credited to efforts by Chinese planners to reduce transit costs for western-sourced raw materials moving to the factories within the east or, alternately, to establish more factories in the west that convert minerals and ores to higher value-added products through the manufacturing process. Greater industrial production in the west raises incomes and tax revenues for development while slowing the eastward migration of “the best and the brightest” as well. Still, at present imported metal products such as sheet steel or I-beams from more efficient plants in South Korea or Japan are often cheaper than the same products produced in interior China because of these high transportation costs.
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Mineral Resources (Kuàngch?n z?yuán ????)|Kuàngch?n z?yuán ???? (Mineral Resources)