China: the real big picture

China is in the media every day, with news stories, economic data and human interest.

Anyone absorbing this information would form a big picture of rapid growth and great importance to Australia. But there is usually an undercurrent of negativity, be it authoritarian government, corruption, inefficient spending on infrastructure, the take-over of poor nations resources or the excessive buying of assets in rich nations.

Sometimes the story is very positive, such as the huge tourism boost to Australia from China, hundreds of millions of people taken out of poverty by Chinese economic success, or the cheap prices of so many goods produced in China.

There is validity in all these perspectives but they miss much bigger and more important realities.

The Chinese Government is a long way ahead of every other government in establishing long-term goals and detailed plans to ensure those goals are achieved. Their view of the future can be seen in their actions. They are hard-line realists and our own government could learn a lot from them.

The difference in thinking between Chinese and Western governments was revealed, though it was mostly misunderstood, at the Copenhagen meeting on climate change in 2009. The West was looking for an agreement on sharing the pain of restraint for the good of the planet. The Chinese were looking for national advantage within a more complete assessment of the situation.

China was blamed, quite fairly, for ensuring that there was no strong agreement on reducing carbon emissions reached at Copenhagen. The explanations for this action by commentators generally implied a lack of concern about the environment and an unwillingness to accept any external constraints.

But before the conference, and since its failure, China has shown tremendous commitment to rolling out alternative energy systems. They now lead the world in power production by solar, nuclear, wind and hydro generators. In July this year their government committed to further expenditure of more than $US300 billion on alternative energy over five years, with the aim of reducing carbon emissions by 45% by 2020 from 2005 levels. They also have plans for regional carbon trading, to be expanded to a national system.

So the question is, why would China oppose measures it had every intention of complying with?

The answer people such as US writer, Stephen Leeb, have come up with is simple and convincing. The Chinese actions indicate that they understand the shortages developing in carbon fuels and various important minerals. They see that there will soon be resulting constraints on the construction of all huge infrastructure projects and particularly on alternative energy systems. And they do not want the hot competition that would happen if the rich world suddenly got serious about alternative energy. They are acting while we keep talking.

In explaining their policies the Chinese always talk 'climate change' but they act 'resource depletion'. And it appears they do so because they know the western media and governments will keep dozing smugly and discuss how silly they are for acting on climate change, but might wake up if the Chinese made a serious case for action based on resource depletion.

China is clearly aiming to get its massive high-speed rail system, its nuclear power plants, hydro dams, its millions of solar panels, its huge wind farms, its airports and its new cities built as fast as possible. There are still hundreds of millions of peasants whose living standards must be raised, so construction of cities, and particularly transport and power infrastructure, must continue strongly for some years yet. But the end is in sight. Doing all that work will get much more expensive when western governments finally acknowledge the problem of resource depletion and start to do something real about it. Increased demand within supply constraints will then drive fuel and metal prices relentlessly higher.

This is a particular problem for China because it is lacking in many resources and is restricted in attaining long-term resource security by the domination of markets and reserves by western global companies. Hence the need to go into high-risk, very poor countries, and to pay high prices.

The scale of demand is enormous. Just to finish building its power distribution network is calculated to require 10% of all the copper reserves in the world.

One example of Chinese action is the huge Aynak copper mine, being built by the Chinese in Afghanistan and due to start operating next year. While western governments are fighting an expensive war there, the Chinese are working to extract metal for their new-era future. Has this story ever made the Australian media?

The big build of China will be slowing as the rest of the world awakes to find that oil and coal prices are going relentlessly up and the rare earths and other more common metals, such as copper, needed to build alternative energy systems, have become hard to obtain and very expensive if you can.

One very important element of the story is this ending. At some point in a decade or two China will have a stable, mostly urban population serviced by adequate infrastructure to last for several decades and powered by as much renewable energy as is possible to achieve. At that point Chinese demand for coal and iron ore will drop rapidly as the economy shifts radically from building infrastructure to consumption goods and services.

China adopted the one-child-policy in 1978. The population is still growing because old people are living much longer but the working age population has already started to fall. When the retired generation dies off a significant population decline will ensue. Even with two-child families becoming acceptable there will be no appreciable growth.

Not surprisingly, as more than a billion people make the most rapid and comprehensive transition in human history there have been problems and mistakes. Small minded critics and lazy media hacks love to focus on the failures, and even on achievements they think are failures, to provide easy comfort and reassurance that nothing serious needs to be done by western governments. Meanwhile they ignore China's huge successes and policies that will shape the future of the planet and particularly of Australia.

Of course China is not the only nation taking realist positions. Germany has also quietly made great progress with alternative energy and France already gets most of its electricity from nuclear power. They also are largely ignored while we continue to do even less than the US.

One way to plan for Australia's future would be to get a deep understanding of China's long-term strategy for transition. We should seriously study their analysis of the global future.

Only realist political action can keep Australia riding high. But its hard to believe an Abbott government, or a chaotic ALP, will attempt anything so challenging.