A ravenous dragon

BESIDE the railroad track, between two hillocks of rust-red soil in the midst of Congo's mining
belt, three Chinese labourers appear as if from nowhere. There are lots of Chinese around these days,
explains one of their compatriots, Harvey Lee, who is driving through the scrub to the nearby copper plant
he runs for a Canadian metals firm. On his way, he points out several rudimentary smelters. “That one”, he
says, waving at a clump of corrugated-iron sheds and belching chimneys, “is owned by a man from
Shanghai.” Moments later, when another ramshackle compound comes into view, he adds, “and that one
belongs to two ladies from Hong Kong.” In all, he reckons, Chinese entrepreneurs have set up half of
Lubumbashi's 50-odd processing plants.
All around Lubumbashi, the capital of Congo's copper-rich province of Katanga, there are signs of a
sudden Chinese invasion. Chinese middlemen have begun buying ore from the area's many wildcat miners
and selling it on to processing plants like Mr Lee's. Locals point out several villas in the city's leafy colonial
cantonment that are occupied by mysterious Chinese businessmen. Katanga Fried Chicken, hitherto
Lubumbashi's most popular restaurant, now has three busy Chinese competitors.
If all goes according to plan, these fledgling businesses will soon be overshadowed by Chinese investment
on a much grander scale. In late 2007 the Congolese government announced that Chinese state-owned firms
would build or refurbish various railways, roads and mines around the country at a cost of $12 billion, in
exchange for the right to mine copper ore of an equivalent value. That sum is more than three times Congo's
annual national budget and roughly ten times the aid that the “consultative group” of Western donors has
promised the country each year until 2010. The Chinese authorities, it seems, are so anxious to obtain
enough minerals to sustain their country's remarkable economic growth that they are willing to invest
billions in a dirt-poor and war-torn place like Congo—billions more, in fact, than Western governments and
investors combined are putting in.
And Congo is not the only beneficiary of China's hunger for natural resources. From Canada to
Indonesia to Kazakhstan, Chinese firms are gobbling up oil, gas, coal and metals, or paying for the right to
explore for them, or buying up firms that produce them. Ships are queuing off Australia's biggest coal port,
Newcastle, to load cargoes destined for China (pictured above); at one point last June the line was 79 ships
long. African and Latin American economies are growing at their fastest pace in decades, thanks in large part
to heavy Chinese demand for their resources.
China's burgeoning consumption has helped push the price of all manner of fuels, metals and grains
to new peaks over the past year. Even the price of shipping raw materials recently reached a record. Analysts
see little prospect of an end to the boom; the prices of a few commodities have fallen on the back of
America's worsening economic outlook, but others, including oil, wheat and iron ore, continue to set new
records. China, with about a fifth of the world's population, now consumes half of its cement, a third of its
steel and over a quarter of its aluminium. Its imports of many natural resources are growing even faster than
its bounding economy. Shipments of iron ore, for example, have risen by an average of 27% a year for the
past four years. Western mining firms are enjoying a sustained boom.
Unwelcome advances
But China's sudden global reach is generating as much anxiety as prosperity. In 2005 America's
congressmen, citing nebulous national-security concerns, scuppered the proposed takeover of Unocal, an
American oil firm, by CNOOC, a state-owned Chinese one. The opposition candidate in Zambia's
presidential election in 2006 made a point of attacking the growing Chinese presence in the country.
Residents of Russia's far east fear that China is planning to plunder their oil and timber and perhaps even to
colonise their empty spaces.
Some non-governmental organisations worry that Chinese firms will ignore basic legal,
environmental and labour standards in their rush to secure resources, leaving a trail of corruption, pollution
and exploitation in their wake. Western companies fret that the Chinese state-owned firms with which they
suddenly find themselves competing have an agenda beyond commercial gain. The Chinese government,
they say, is willing to pay over the odds for mining or drilling rights to secure access to physical resources. It
also intervenes unfairly on its companies' behalf, they claim, by offering big aid packages to countries that
welcome Chinese investment. All this, it is feared, will dent the profits of big oil and mining firms, stoke
inflation and imperil the West's access to resources that it needs just as much as China does.
Diplomats and pundits, for their part, fear that the West is “losing” Africa and other resource-rich regions.
China's sudden prominence, according to this view, will reduce the clout of America, Europe and other rich
democracies in the developing world. China will befriend ostracised regimes and encourage them to defy
international norms. Corruption, economic mismanagement, repression and instability will proliferate. If this
baleful influence spreads too widely, say the critics, the “Washington consensus” of economic liberalism and
democracy will find itself in competition with a “Beijing consensus” of state-led development and
despotism.
Such fears are not entirely groundless if the recent conduct of some of Congo's neighbours is anything to go
by. Angola, to the south, has been receiving so much aid and investment from China that in 2006 it decided
it had no need of the International Monetary Fund's billions and all the tiresome requirements for
transparency and sound economic management that come with them. Sudan, to the north, has shrugged off
Western threats and sanctions over the continuing atrocities in Darfur, thanks in large part to China's
readiness to invest in Sudanese oilfields and buy their output. Farther afield, China's eagerness to do
business in Myanmar, and its consequent reluctance to chide the tyrannical generals that run the place,
helped to prevent a forceful international response to the violent repression of peaceful demonstrations there
last year.
Nonetheless, this special report will argue that concerns about the dire consequences of China's
quest for natural resources are overblown. China does indeed treat some dictators with kid gloves, but it is
hardly alone in that. Its companies do not always uphold the highest standards, but again, many Western
firms are no angels either. Fifty years of European and American aid have not succeeded in bringing much
prosperity to Africa and other poor but resource-rich places. A different approach from China might yield
better results. At the very least it will spur other donors to seek more effective methods.
 For all the hue and cry, China is still just one of many countries looking for raw materials around the
world. It has won most influence in countries where Western governments were conspicuous by their
absence, and where few important strategic interests are at stake. Moreover, as China is becoming more
involved in places such as Congo, its policies are beginning to change. It has promised to co-operate with
the World Bank in its development efforts in Africa. It no longer seems prepared to back its most
objectionable allies in the face of international opprobrium. Its diplomats, for example, did eventually stop
parroting their line about unwarranted interference in the internal affairs of a sovereign state and allow
United Nations peacekeepers to be deployed in Sudan.
The saga over Sudan shows how sensitive the Chinese authorities have become to criticism, despite their
impassive reputation. When Steven Spielberg resigned as an adviser to the Beijing Olympics in protest at
China's failure to do more about Darfur, a shrill chorus of criticism arose from China's official media—
suggesting that such gestures do indeed have an impact.
Chinese companies will inevitably find themselves in fierce competition with Western ones for natural
resources, as they must if global markets are to work efficiently. For the most part, however, they do not
operate very differently from their peers. To the extent that the Chinese government does subsidise oil
production, it helps to bring down the price for everyone else (its subsidies for oil consumption are another
matter). As the world's biggest consumer of many commodities, China naturally wants to ensure a steady
supply of them to keep its economy going. But markets for commodities are global, and the risk of any one
consumer cornering supplies, or securing them at a lower price, is negligible.
Own goal
The worst fallout from China's quest for natural resources will be seen not in the countries they
come from, nor in the countries that are competing for supplies, but in China itself. Over the past few years
the volume of raw materials it consumes per unit of output has risen sharply. In particular, China has gone
from miser to glutton in its use of energy, and is now struggling to diet. That has involved bigger imports of
oil, gas and coal, and so more foreign entanglements. But it has also led to the rapid depletion of resources
that China cannot import, such as clean air and water.
China is building a huge stock of grimy heavy industry, just as its coastal provinces are getting rich enough
to care about the consequences. Protests about environmental issues are on the increase. There is not enough
water in the Yellow River basin, which covers a huge swathe of northern China, to supply both farmers and
factories. Acid rain from coal-fired power plants is reducing agricultural yields, raising the spectre of
increased rural unrest. As it is, the authorities are struggling to ensure that the air will be fit for athletes to
breathe at the Olympics in Beijing this summer. All the while, the number of noxious steel mills, cement
kilns and power plants relentlessly increases. Global warming, which is fed by their fumes, will make all
these problems even worse.
Environmental concerns are unlikely to bring down the Communist regime, or even to stir as much
resentment as the arbitrary confiscation of land currently does among China's poorest. But those concerns
are certainly prompting the government to reflect on what sort of economic path it wants to pursue. So far,
its efforts to temper economic growth, encourage energy efficiency and wean the country off heavy industry
have had little effect. But continued failure would eventually make China a less prosperous and more
unstable place.