Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

China's Security of Supply

Economics / China Economy Jan 01, 2016 - 12:44 PM GMT

By: Richard_Mills

Economics

Consider:

  • There is a slowing of production and dwindling of reserves at many of the world's largest mines.
  • All the oz's or pounds are never recovered from a mine - they simply becomes too expensive to recover.
  • The pace of new elephant-sized discoveries has decreased in the mining industry.
  • Discoveries are smaller and in less accessible regions.
  • Mineralogy & metallurgy is more complicated making extraction of metals from the mined ore increasingly more complex and expensive.
  • Mining is cyclical which makes mining companies reluctant to spend on exploration and development.
  • A looming skills shortage
  • There is no substitute for many metals except other metals - plastic piping is one exception.
  • Metal markets are small so speculation is a larger factor.
  • There hasn't been a new technology shift in mining for decades - heap leach and open pit mining come to mind but they are both decades old innovation.
  • Country risk - resource extraction companies, because the number of discoveries was falling and existing deposits were being quickly depleted, have had to diversify away from the traditional geo-politically safe producing countries. The move out of these "safe haven" countries has exposed investors to a lot of additional risk.
  • Lack of recognition for population growth, growing middle class w/disposable incomes and urbanization as on-going demand growth factors.
  • Climate change.

Increasingly we will see falling average grades being mined, mines becoming deeper, more remote and come with increased political risk.

Fact; The world's resources are finite.

Fact; Supply is constrained and demand keeps growing along with the world's population.

Fact; A sustainable and secure supply of raw materials and energy is becoming the number one priority for all countries.

Major powers are scrambling for as much of the world's resources as they can control. Exploration and drilling intensify daily. Previously inaccessible or unprofitable areas are targeted - the days of easy access to the globe's resources no longer exist.

Unseen wars in previously unheard of places - soon to become front page news - are beginning for resource control. Peace today, harmonious relations tomorrow are nothing but fleeting illusions.

Hydrocarbons, mineral resources, fresh water and arable land are finite.

Understand someday peak oil and gas proponents will be proven right.

Understand arable, productive farmland is disappearing from overuse, desertification and urbanization.

Understand the world's current population of 7 billion people use 60 percent of our annual renewable freshwater supply.

The world's population is projected to hit 10 billion by 2050 - global demand for food and water is expected to increase by 50% and 30% respectively by 2030.

"It should be pointed out that when we speak of wars in the last third of the twentieth century we are talking about civil wars. Between 1965 and 1999 if we look at those wars in which more than a thousand people were killed a year, there were seventy-three civil wars, almost all driven by greed to control resources -- oil, diamonds, copper, cacao, coca, and even bananas." William K. Tabb, Resource Wars

This is our reality - we're living on a relatively small planet with a finite amount of reserves and a growing human population.

Broad spectrum peak commodities is a cause for concern, for all of us, over the short, medium and longer term.

Try and imagine the coming pressure on governments in regards to sourcing resources on a national scale. Conflicts are inevitable.


Global distribution of mineral reserves

One country seems to have recognized its need for security of supply and is actively securing said resources for itself. One country is staking claims, through aggressive diplomacy, wherever vital reserves of resources can be found.

China's Security of Supply

China is now the world's largest trading country, it has the second-largest economy and the largest economy in terms of purchasing power parity.

In October 2015 China's leaders outlined the country's 13th five-year plan (running from 2016 - 2020). Their goal is to continue efforts overhauling China's investment-led economy into one driven by services and consumption.

China's stated 2020 GDP goal requires adding an economy the size of Switzerland's every year.

China is the only global power carrying out a concerted, long-term plan to accumulate resources and the country is cornering many markets. Let's take a look at how China is securing the world's resources...

Silk Road

"By building much-needed infrastructure across the Silk Road routes - from roads and rail links to ports and resource pipelines - China hopes to build "a community of common interest, destiny and responsibility."

No country is better suited than China to lead the way on infrastructure. Because its own development has been propelled partly by massive investments in domestic infrastructure projects, China has plenty of recent experience in the field, not to mention a vast construction materials industry. Moreover, its huge volume of foreign reserves - which stand at some $3.5 trillion and are likely to continue growing - provides the wherewithal to fund the projects.

China has already devoted some of its reserves to capitalising the recently established Asian Infrastructure Investment Bank (AIIB) - an initiative that China spearheaded to support its Silk Road ambitions. With the participation of 57 countries from five continents - including some of America's closest allies, such as the UK, France, and Germany, which joined over US protests - the AIIB is the first initiative designed specifically to fulfil infrastructure needs in the developing world, and especially the Asia-Pacific region.

The return on these investments will be massive. Experience since the second world war shows that developing countries capable of seizing the strategic opportunity of the international transfer of labour-intensive industries can achieve 20-30 years of rapid economic growth. That will fuel the emergence of new markets coveted by more developed countries - including China - while creating space in China for higher-value-added industries to take hold." 'China's Silk Road Vision ' Economia

The Silk Routes, collectively known as the "Silk Road", referred to a 7,000 mile network of interlinking trade routes that were used for three millennia. They connected China, India, Tibet, the Persian Empire, the Mediterranean countries and parts of North and East Africa.

Silk Road

One Belt, One Road

President Xi Jinping launched China's "One Belt, One Road" (OBOR) initiative in 2013. The stated aim was to connect major Eurasian economies through infrastructure, trade and investment.

The "Belt" refers to a network of overland road and rail routes and oil and NG pipelines planned to run along the major Eurasian Land Bridges - China-Mongolia-Russia, China-Central and West Asia, China-Indochina Peninsula, China-Pakistan, Bangladesh-China-India-Myanmar. They'll stretch from Xi'an in central China through Central Asia reaching as far as Moscow, Rotterdam, and Venice.

The "Road" is a network of ports and other coastal infrastructure projects from South and Southeast Asia to East Africa and the northern Mediterranean Sea.

"A network of new "South-South" trading routes connecting Asia, the Middle East, Africa and Latin America are set to revolutionize the global economy. Trade and capital flows between emerging areas of the world could increase tenfold in the next forty years. In the same way that trade between the developed nations exploded in the 1950s and 1960s, we expect the 21st Century to see turbocharged trade growth between the emerging nations." HSBC Global Research

"In all trade corridors in which China participates, strong growth is anticipated. So strong in fact that it is no exaggeration to highlight this as the emergence of a new world trade order; by 2030, China will effectively be fulfilling the central trade role occupied by the US and the EU today." The Super-Cycle Report, Standard Chartered Research 2010

The China Global Investment Tracker is a comprehensive data set covering China's well over $1 trillion in energy, mining, real estate and high-tech global investment and construction activity.

An article published by the New York times 'The World According to China' by Gregor Aisch, Josh Keller and K.K.Rebecca Lai says China has displaced the United States and Europe as the leading financial power in large parts of the developing world. Here's where China has the most influence , based on its share of foreign investment since 2005.

China's Worldwide Reach

From ZDNet we get the above map and the following snippet :

"Living in the United States, the scale of foreign investment by Chinese companies isn't so obvious. Much of the $57.8 billion of Chinese investment in the U.S. since 2005 has been in the finance sector. I didn't comprehend the scale of the Chinese investment until I visited Ethiopia earlier this month where nearly all the construction projects -- including a major light rail line -- were being done by Chinese firms (sub-Saharan Africa has the most investment from China of any region). Many huge factories on the outskirts of the capital city are joint projects between China and Ethiopia with the flags of both countries flying side-by-side. The redevelopment of a major road was paid for by Chinese government and is now dubbed "Ethio-China Friendship Avenue." In other words, the scale of Chinese investment is overtly apparent in Ethiopia and many other countries around the world, if not as obvious in the developed world."

In a recent article 'Chinese investment along One Belt One Road Revealed' Finbarr Bermingham discusses Chinese investment along the new Silk Road.

"The One Belt One Road (OBOR) initiative is the single most ambitious infrastructure plan in the world today, and data seen by GTR shows that over the third quarter of 2015, the vast proportion of China's governmental loans were disbursed along the route."

In 'A Journey Along Copper's New Silk Road' Dave Forest gives an insight into China's move on copper and gold, and perhaps a taste of things to come, along the OBOR...

"By the looks of things, investment along this "highway of the future" will be a major trend in mining and exploration over the next decade."

Conclusion

The First Industrial Revolution started with technological innovation driving the slow industrialization of the United Kingdom in the 18th century which merged into the Second Industrial Revolution around 1850. The start of the second industrial revolution was marked by a transition of technological leadership from Britain to the United States and Germany.

What is happening today is not being driven by technological innovation or technological leadership, what's driving China's economy today is urbanization, population growth and consumerism.

Consider what's taking place, and the result...

  • A global shift in trade with China by far the biggest beneficiary.

  • The exporting of Chinese current industrial/consumer overcapacity to trading partners along 'old is new again' trading routes.

  • All road, rail and shipping lines leading back to China with much of the world's resources on it to build more industrial and consumer oriented manufacturing.

China becomes the hub, no let's change that from CHINA BECOMES, to CHINA IS, FOR MOST OF THE WORLD, it's industrial/consumer manufacturing center.

This will be accomplished by using vast amounts of the world's resources, that China controls through infrastructure lending and off-take agreements for resources.

The capture of the world's resources by China, the country's aspirations to become the world's leading manufacturer and exporter of finished goods, should be on all our radar screens.

This fascinating process, being played out on the world's stage, is on my radar screen.

Is it on yours?

If not, maybe it should be.

By Richard (Rick) Mills

www.aheadoftheherd.com

rick@aheadoftheherd.com

If you're interested in learning more about the junior resource and bio-med sectors please come and visit us at www.aheadoftheherd.com
Site membership is free. No credit card or personal information is asked for.

Richard is host of Aheadoftheherd.com and invests in the junior resource sector.
His articles have been published on over 400 websites, including: Wall Street Journal, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Pinnacledigest, Uranium Miner, Beforeitsnews, SeekingAlpha, MontrealGazette, Casey Research, 24hgold, Vancouver Sun, CBSnews, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor, Mining.com, Forbes, FNArena, Uraniumseek, Financial Sense, Goldseek, Dallasnews, Vantagewire, Resourceclips and the Association of Mining Analysts.

Copyright © 2015 Richard (Rick) Mills - All Rights Reserved

Legal Notice / Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard (Rick) Mills Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules