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BOOK REVIEW: ‘Winner take all’

- The Washington Times - Friday, August 10, 2012

WINNER TAKE ALL: CHINA'S RACE FOR RESOURCES AND WHAT IT MEANS FOR THE WORLD
By Dambisa Moyo
Basic Books, $26.99
272 pages

Everywhere I have gone this year, I have encountered China Inc.'s voracious appetite for land and resources. I arrived in Australia in February to find the newspapers denouncing the sale of prime agricultural properties, such as the famous Bobbara Station in New South Wales, to Chinese-government- controlled entities. (For an American equivalent, imagine the Chinese taking over the King Ranch in Texas.)

Next came an April lecture tour of New Zealand, where Chinese corporations have been buying up dairy land. A friend of mine — who happens to be one of New Zealand's leading developers — assured me that a new law requiring government approval for foreign land purchases over 12 acres would solve the problem. He was flabbergasted when the next China deal — for 20,000 acres of prime dairy land — went through anyway.

Canada in May was all abuzz with news of China's investment in Alberta's oil sands. Alberta has the largest proven reserves of oil outside of Saudi Arabia, and PetroChina had just bought out its Canadian partner to become the first state-owned Chinese company to wholly own an oil sands development — a development that 75 percent of Canadians opposed.

These are not isolated events. All over the world, China is snapping up mines, agricultural land and oil fields at a frenetic pace, often paying more — considerably more — than the going rate. The sheer scale of its purchases is astonishing. Over the past six years, China has spent an estimated $400 billion — about $1 billion per week — on direct investment abroad, most of which has gone toward securing commodities.

From my perspective, China's global buying binge raises serious questions.

If China is determined to deploy the bulk of its large and growing foreign reserves, currently estimated at $3 trillion, in this fashion, it will be well on its way to controlling a significant percentage of key global commodities.

This sudden commodities grab would be disruptive enough if it were done with private capital. But it is not. This spending spree is not just being orchestrated by the Chinese party-state; it is the Chinese party-state, for the most part, acting through its vast network of state-owned and state-controlled corporations.

I am convinced that we need to think long and hard about the security implications of allowing China to corner certain sectors of the commodities market.

A whole host of questions arises: How would China's leaders behave if they were in a position to set prices for, or restrict access to, various key commodities? Would they restrict access for noneconomic policy ends? How and under what circumstances would they resort to military force to defend those resources, once they have purchased or otherwise asserted control over them?

So it was with great expectations that I sat down to read Dambisa Moyo's new book, "Winner Take All," which addresses China's drive to achieve market dominance in the coming struggle for the world's resources. I must admit that I came away disappointed.

In Ms. Moyo's rather jaundiced view, our plundered world is rapidly running out of everything — land, water, energy and minerals — and China cannot be faulted for trying to lock up the lion's share of what little remains. In fact, she believes: "Of all the world's great powers, only one, China, has focused its economic and political strategy on anticipating the considerable challenges presented by a resource-scarce future."

She also believes that China, unlike the United States, is a beneficent presence in the world because it "underwrites schools and hospitals, and pays for infrastructure projects such as roads and railways, catering to the needs of the host nations and making China an altogether more attractive investor than international bodies such as the World Bank, which often tie loans to harsh policy restrictions."

Page after page of prose describes the Chinese party-state as operating from the purest of economic motives, exculpates China from charges of neocolonialism and pooh-poohs the possibility that China might be tempted to military action in defense of its interests. Whereas the United States intervened in Iraq for its oil — or so she claims — China would never, ever engage in such imperialistic adventures.

Really?

It is telling that Ms. Moyo cannot bring herself to mention, even in a footnote, one of the biggest territorial grabs in history, namely, China's claim to the resources of the entire South China Sea — lock, stock and oil barrel. To assert that claim, China has built a dozen bases on the two archipelagos that sprawl across the sea, the Spratlys and the Paracels. Last year it created an administrative city that it calls Sansha to govern the area. And this year it announced that it was formally garrisoning troops there.

At the same time, China has arrogantly rebuffed the competing territorial claims of Vietnam, the Philippines and several other Southeast Asian countries. Not only that, but it has shown a willingness to back up its own claim with military force. China's actions have united the ASEAN nations against it and led several to seek closer ties with the United States.

Then there is Ms. Moyo's highly questionable claim that Chinese aid, unlike Western aid, comes with no strings attached. Beijing's aid is in fact anything but altruistic. It is intended to bend as many governments to its will as possible.

Take the country of Cambodia, for example, which suffered so much from the Maoist-inspired and Beijing-supported predations of the Khmer Rouge. Prime Minister Hun Sen, referring to those depredations, used to call China "the root of all that is evil in Cambodia." Now he gushes that Phnom Penh's relations with Beijing are "entering into the best stage in history."

Why has Hun Sen become a panda hugger? One word: money. When the World Bank threatened to suspend hundreds of millions of dollars worth of assistance because of Phnom Penh's "rampant corruption and its crackdown on civil liberties," China came to the rescue with an April 2006 offer of $600 million worth of grants and loans. Other money has followed.

In Angola, home of the second-largest oil deposits in Africa, the International Monetary Fund tried to force the government "to agree to provisions that would slash graft and improve economic management" as a first step toward moving the country in a democratic direction. Again China stepped in, offering a package of loans and credits worth up to $6 billion, on condition that Chinese firms carry out the reconstruction of the oil infrastructure. Privileged access to Angola's oil resources may well be another, unpublicized, condition.

When Western aid agencies insist that dictators respect human rights, they are not tying loans "to harsh policy restrictions," as Ms. Moyo insists, but to universal human values. When China rewards bad behavior by bribing those same dictators and turning a blind eye to human rights abuses, this is not accurately characterized as a "value-neutral" foreign policy. Rather, it is one that encourages despotism and rewards tyranny.

Regarding how China might behave when it gets a lock on a certain commodity, we need not resort to speculation. Two years ago, Beijing used its monopoly on what are called rare earths to punish Japan for arresting a Chinese fishing boat captain who violated Japanese territorial waters. Because Japan depends upon Chinese shipments of rare earths to manufacture sophisticated electronics goods, this economic warfare proved very effective. Japan found an excuse to release the captain and, after a time, China ended the embargo.

I can understand why the Angola and Cambodia examples may have escaped Ms. Moyo's attention, but I do admit to being surprised that she passed over the South China Sea without mention. The absence of any mention of this dispute — which is, after all, about resources — in a book about China's drive for resources is puzzling, especially since it directly contradicts her claim that China is a benign international player with no territorial ambitions.

But these lacunae fade into insignificance when compared with Ms. Moyo's failure to mention China's embargo on rare earth shipments to Japan. Here we have a major international incident that dragged on for months, attracted enormous media attention and provides a definitive answer to the question of how China might behave when it gains the upper hand in the competition for resources. Here we see the Chinese party-state using its near-monopoly on a given commodity — rare earths — to engage in a form of economic warfare to achieve political and strategic ends. And the author of "Winner Take All" has nothing to say about it.

Ms. Moyo subtitled her book, "China's race for resources and what it means for the world."

The book that subtitle describes, however, remains to be written.

Steven W. Mosher, the author of "Hegemon: China's Plan to Dominate Asia and the World" (Encounter Books), is the president of the Population Research Institute.

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