China's Growth and Its Effect Essay

  • Length: 10 pages
  • Sources: 10
  • Subject: Economics
  • Type: Essay
  • Paper: #19567311

Excerpt from Essay :



China's Rise: The strategic Stake

While we have so far discussed the positive economic impact of a growing China from the perspective of Australia, there are also some concerns about China's growing stature and the changing strategic balance. As a communist nation, the U.S. And its allies including Japan have always viewed China with caution. China has repeatedly claimed that it is fully committed to peaceful economic growth as Zha Peixin, the vice president of CPIFA (Chinese people's institute of foreign Affairs) stated, "China will stick to the peaceful development, opening up, and building a harmonious society domestically and promoting a harmonious world internationally." However, the recent arrest of the Australian mining giant Rio Tinto's executive officer in China over charges of espionage has created some friction in the relationship. The recent issues involving Australia granting of visa for Rebiya Kadeer, the human rights activist from China, much against the Chinese government's wishes, have caused more problems. [Andrew Shearer, 2009]

Largescale Investment by China's state owned companies are creating another uproar. For instance, China's control of the rare metals market known as Lanthanides is already causing concern. China now controls almost 95% of the worlds lanthanide market and the country is gradually restricting the export of the rare metals. Since lanthanides are used in a variety of electronic gadgets, automotives and in military explosive and radar devices, China's dominance in this market is perceived as a strategic threat. Recently, China Nonferrous Metal Mining Group (CNMC) agreed and bid for a deal worth $185.7 million for a 51.66% stake in the Australian mining corporation Lynas Ltd. [China Daily] While the review board is still delaying the final decision on the proposed deal it has triggered widespread speculation and concern over china's bid to monopolise the Lanthanide market.

That China was flexing its strategic muscle was clearly evident in 2007 when the country, which literally controls the rare metals market, refused to sell to many of the U.S. companies including W.R. Grace, an important product supplier for the oil refineries. Since rare earth metals are essential for the oil refineries China's stance literally posed a grave threat to the oil companies in the U.S. Only when the U.S. state department intervened China released the supplies again. This threatened domination by China in the rare earth's market is a cause for concern particulary for the west. As Mr. Ed Richardson of Thomas & Skinner, one of the remaining U.S. high-performance magnet companies says, "I think they've worked their plan to perfection," says companies. "If we look at how dependent the world has become on rare-earth elements, it's kind of scary. It all happened right under our nose." [Kent Garber, 2009] the sudden rise in the price of the rare earths is also concerning from the economic viewpoint. For instance, the price of Neodymium, one of the important Rare earth metals, has soared from $8 to $50 per kilogram in 2008. With more than 95% of the rare earths market under its belt, China is all set to exploit the global market demand for these metals. This is exactly why the U.S. And Australia are more concerned about letting more investments from China in the Australian minerals and ore industry. [Kent Garber, 2009]

The growing number of bids by China's State owned companies in Australian mining firms have also caused some concern prompting a cautious stand by the new Australian government. As Peter Arden analyst of Ord Minnett Ltd. says "China has strong financial reserves. Australia has never had sovereign governments investing directly in companies and mineral projects -- that gives them direct insight and ability to bring pressure on pricing." There is also a strong feeling that China is exploiting the economic recession to further its foothold in the rare earths and mineral industry. "In the current difficulties with the global financial crisis and companies having trouble raising capital to expand, I don't see how the government could nock it back. The pressure is already being applied to them that jobs would be lost without this investment." [Gemma Dalley, 2009]

China's Growing Military Presence

As Hugh White in his article relating to the Rise of China reports "China's rise may finally close the era of western maritime domination of the Asia Pacific region which began 500 years ago with Vasco de Gama." [Robert Ayson, 2008] Thus far, Australia had developed peacefully without worrying about any threat to its security from the Asian continent. Now the chief question is if the absence of western dominance in the South East Asian region (now that Hong Kong is back with China) affect Australia?. China's impressive build up of the submarines in the eastern shore has also triggered some concerns. The Australian Prime Minister Mr. Rudd's recent speech stressing the need for the country to boost its defensive capabilities in the wake of the 'regional arms buildup' related to the growing Asian economies has the clear message (though not direct) of the changing geopolitical atmosphere. [Robert Ayson, 2008]

Recently, U.S. And Australia shared their concerns that China's military buildup was way beyond defensive purposes. As admiral Keating, who heads the U.S. global Commands said, "We are anxious to engage with them. We want to understand much better than we do now China's intentions & #8230; China does publish a [defence] white paper but we find it to be less than fulfilling & #8230; We would say, don't stand in isolation in the Asia Pacific." [Jonathan Pearlman, 2009] the recent meeting between Austrlaian defence chief Angus Houston and his American counterpart Mr. Keating was to involve China in a trilateral military exercise to ease the rising tensions in the asia pacific region. The military blueprint of the Rudd govermnment clearly reports Australia's concerns, "[We] place a high priority on engaging China on matters of shared security interest,." Our ability to speak frankly on issues such as China's military modernisation is an indication of the growing maturity of our relationship.." [ Jonathan Pearlman, 2009] Though China has not so far participated in the proposed military excercises it has agreed in principle to consider the offer by the U.S. And Australia as a trust building measure. As China's Australian ambassador Mr. Zhang Junsai said, "Of course anything that is conducive to peace and stability of the region, I think that we'll study it." [Brendon Nicholson, 2009] These mutual military engagements would offer an excellent platform to openly discuss and to allay concerns and unresolved issues that might otherwise affect the progressive and mutually beneficial bilateral ties with Australia.

Conclusion

There has been a great change in the global economic front. The recession has limited the global demand for Australian minerals and resources but the continued forward growth of China has filled in this chasm in global trade to a considerable extent. The economic dynamism of China has greatly helped Australia tide over most part of the recession without much damage. The export of minerals and energy resources has increased the national income for Australia, which has in turn invigorated the national economy by triggering sustained reinvestments. China's growth would contribute positively to Australia because China and Australia are complimentary economies. A growing China is good for Australian economy as it implies growing demand for its mineral resources and agricultural products. Also, the fact that there are no historical grievances between China and Australia assures a secure and stable bilateral partnership.. The proposed joint military exercises involving China, U.S. And Australia would largely ease the strategic geopolitical concerns clearing the road for more active cooperation between Australia and China in the future.

Since the western markets are more saturated it is most relevant for Australia to engage actively in the economic relations with China as it offers tremendous impetus for its own national growth. The surging investment from China in Australia will help to stimulate the national growth further. However, strategic concerns have prompted careful assessment of investment by China's State owned companies for majority stake in Australian firms. There is no question of doubt that the growing stature of China is good news for Australia as the two countries have a mutually beneficial trade and economic partnership. Though some recent incidents have created unease and friction between these long standing partners these issues can be resolved without affecting the mutual trust and friendship. As Deniss Richardson, the Australian Ambassador to U.S. said "the question for Australia is not weather China's growth is innately good or bad. Australia made up its mind long ago that it was a good thing" [Robert Ayson, 2008] However, the changes in geopolitical atmosphere arising due to a growing China would require some delicate balancing in Australia's relationship with China and its western allies.

Bibliography

1) ABS, 'China: Factsheet', Retrieved 19th Sep 2009, from, http://www.dfat.gov.au/geo/fs/chin.pdf

2) Frederick Balfour, 'China Surprisingly Strong GDP Growth 7.9%', Retrieved 19th Sep 2009, from, http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/07/chinas_gdp_grow.html

3) Richard Lester &…

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