Sunday, July 19, 2015

"China's Strategy to Secure Natural Resources"

A correspondent writes,

"China's Strategy to Secure Natural Resources" looks like it might be an interesting read. Note that this was written within a year or two of the peak of the commodity capex cycle.

"Evidence from the 16 largest Chinese natural resource procurement arrangements shows that Chinese efforts--like Japanese deployments of capital and purchase agreements in the late 1970s through the 1980s--fall predominantly into categories that help expand, diversify, and make more competitive the global supplier system"

I hadn’t thought about the parallels to Japan. Might be interesting to go back and look at that, there are some interesting parallels. A mercantilist model built on an export economy, a sustained period of economic growth at fairly high rates creating another major node in the world economy (ie third node after Europe and US, now China has become 4th node), tremendous free cash flow which is then leads to substantial mal-investment, and demands on the resource base that lead to high prices followed by huge capex and eventually a bust. We had two big spikes in oil prices in the 70s followed by a bust in the early 80s…same pattern with a lot of other commodities.
Has anyone read this?


Taylor Conant said...

Japan is absolutely the model China is trying to follow, with elements of Korea. The role of quasi-SOE in Japan's mercantilist development pattern is severely underappreciated.

Taylor Conant said...

Also, protip, since its a white paper there's a good chance you can find PDF floating out on the web somewhere not behind a gate. You might also visit the authors website, he's an academic and they often post position papers and the like on their website, of have a blog where you can infer most of their argument by piecing together other writings. Finally, you might search YouTube for author interviews or roundtables or book tour interviews (less likely in this particular case, but still). These guys tend to be one track minds and you might find they've given the same speech or talking points on the subject in numerous venues and at least one is recorded on YouTube. Just some ideas.

James said...

It's on Google Books but I can't find a full copy anywhere for free.

James said...


I haven't followed the coal industry closely, and I'm curious to hear people's opinions about why it's collapsed over the past twelve months.

My casual impression is that 1) Thermal coal prices fell in 2012 as fracking reduced natural gas's price, but met coal was still near peak prices. 2) Then met coal prices began to collapse, but natural gas rebounded, and that kept the industry alive. 3) Met coal continued to weaken over the past year while natural gas plunged again, and this 1-2 whammy is forcing most of the industry into bankruptcy.

Is this accurate?