China To Become World’s Largest Consumer Market by 2015

 

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Tonight I was listening to Radio Havana’s weekly news review and then later Radio China International on shortwave and both stations brought up this story.   It hasn’t happened yet of course, but the fact that China is on pace to surpass us as the largest consumer market within a couple of years is pretty significant and I didn’t see this in the US news, although it looks like Forbes covered it.

Although it is significant, it doesn’t exactly spell the end of the United States as we know it or anything.  What it does mean is that we’re likely to start feeling the pinch of a little extra resource scarcity as China’s purchasing power grows and the Chinese consumer is able to consume more.   As pointed out in China’s Rise and Competing for Resources, China already consumes a sizable portion of many of the world’s commodities.

There’s still a large disparity between consumption levels/standard of living between the average North American/EU citizen and the Chinese citizen, but China’s sheer numbers and recent economic growth make it a market to take seriously.

Let’s play with some rough figures from Wikipedia here…

List of Countries by GDP (Nominal)

China has a population of 1.3 billion, a GDP of 7.3 trillion and a per capita GDP of about $5,400USD.

If the per capita GDP of China increased by $1, it would be comparable to adding another Liberia or Djibouti to the world (about 1.3 billion dollars)

If the per capita GDP of China increased by $10,  it would be like Iceland or Congo to the world (around 13 billion)

$100?    Another Vietnam or Hungary (56 and 57th largest economies in the world) – keep in mind this is about 2% growth. (about 130 billion)

$1000?   Just like adding another Australia, Mexico or Spain.    This is roughly 20% growth and would represent 1.3 trillion dollars.

These figures are just pulled from Wikipedia and me shooting from the hip with them, but I hope you get the idea that a little bit of growth goes a long way with China and as they grow, finite resources could become a little more dear to us in the United States.

What should be done about this?   At a personal level, develop levels of self-sufficiency in order to reduce your dependency on outside resources.     At a higher level, it should be good motivation to develop sustainable systems in order to allow more people in the world to live a higher standard of living without causing massive environmental degradation.   The Chinese people have a right to pursue a better life, just as we in the west have but I hope we can find ways to do things a little different as more of the world begins to demand lifestyles similar to ours.

China’s Rise and Competiting For Resources

Source:  Time To Wake Up:  Days of Abundant Resources and Falling Prices Are Over

I just started reading  “World Right Side Up: Investing Across Six Continents (Agora Series)” by Christopher Mayer last night and came across this chart taken from Jeremy Grantham’s “Time To Wake Up: Days of Abundant Resources and Falling Prices Are Over” from his April 2011 newsletter.   The chart is pretty straight forward – it names a commodity in the left hand column and then lists China’s percentage of total world consumption of that commodity in the right hand column, i.e. China consumes 53% of the world’s cement production.

First, I want to say that I don’t think we (the United States) should paint China out to be a boogeyman or take any sort of antagonistic stance towards the Middle Kingdom over their economic rise, so I’m not trying to fan those flames.   I know they do some sketchy things over there (and we do as well), but I think some of the crying about them using “our” resources is a little undignified.   Let’s beat them fair and square (and peacefully!) instead of stomping our feet and demanding that they stop using as much oil or whatever.   After all, can you really blame the Chinese for wanting a better standard of living, especially considering the disparity between the average Chinese citizen and American citizen?

Anyways, I have a few thoughts about this chart:

–  Although the news has lately been touting a slowdown in China’s economy, it’s not exactly coming to a screeching halt either.   China’s consumption of commodities will most likely continue to rise.

–   While commodities can certainly be nationalized within a state, on a global level these inanimate objects do not have loyalties or choose sides.   They go to whoever is willing to pay for them.  Oil in Iran, Copper in Chile, Nickel in Kazakhstan and all of the world’s other commodities aren’t inherently “ours” and they’ll ultimately go to whoever is in the best position to purchase them.   Some political arrangements can (and are) made to dictate the flow of commodities, but as the balance of power between the West and China (and others) begins to tip, maintaining these arrangements will become difficult (see:  Petrodollar System).   In other words, we’re losing carte blanche over the world’s markets.

– The figures are just for China – what about Brazil, India, Russia, Turkey, Indonesia, Taiwan, Korea, Mexico, Thailand, Vietnam or any other place in the world where things are happening, not to mention the EU, Japan and other developed economies?   Standards of living are rising in many parts of the world for a large segment of the world’s population and commodity usage tends to go up correspondingly.  Increased world demand for finite materials means we’ll pay a higher cost for what we have.

–  China is roughly one-fifth of the world’s population and they consume a greater percentage of the world’s output in all of these commodities except the bottom six.   Factoring in China’s projected economic growth and as previously mentioned and the many other places in the world that are emerging, one can logically conclude that certain resources might get a little tight around the world.

–   Not trying to sound racist or anything, but I thought China’s rice consumption was going to be higher than that  :::shrugs:::   Soy consumption was a little lower than I thought too.

–  Scarcity often leads to conflict.   This is true between individuals, communities and governments.

Now let’s kick over some thoughts on addressing the issue:

– Reduce, recycle and reuse.   Might as well get on board now.

–  This might be a good time to make investments in commodities, one way or another.  Mining, energy or agricultural-themed stocks, ETF’s, precious metals investment or anything else.

–  Self-reliance in energy efficiency, food production or anything else that involves consuming commodities might be an even better investment.   Grow a garden, explore alternative energy and increasing energy efficiency, learn skills and do things for yourself.

– Rising prices of commodities on the world markets and increased shipping costs could force us to look to source things locally .  Personally, I think there is a bit of a silver lining here in that there’s a possibility to see something of a revival in local businesses and farms as increasing costs abroad make it more viable to produce close to home.   I think it would be a good idea to at least begin to get an idea of what is available (and when it’s available) from your local area in the way of food, goods and services.   I think it’s an even better idea to begin to establish relationships with local merchants and farmers now.

Odds are that if you’re reading this (and other similar blogs around the internetz), you’re already of the mindset of DIY, preparedness, thinking locally, sustainability and  self-reliance and probably already taking measures to combat scarcity and add some security to your life.   I think that instead of letting fear get the best of us when we look at the cold, hard facts I think that they should just serve as a bit of reinforcement to why we live the way we do and some motivation to continue to improve our lot in life.   As individuals we cannot change the course of the world, but we can certainly take action as individuals to determine how the change of the course of the world affects us.

 

Also, I think it’s a good idea to talk to people you know about these sort of things and more importantly, share the solutions.   Feel free to share this blog, comment below and/or contact me at Ryan@AmericanOikos.com


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