The Foreign Service Journal, May 2005

enterprise reforms that were taken to adjust to the market and international competition. Both developing and devel- oped economies have had to adjust to globalization. Our sin- gling out China or any particu- lar country is meaningless, because if U.S. production did not shift there, it would have shifted to other developing countries, not back to the United States. Many in the United States have also voiced concerns about increased Chinese holdings of U.S. Treasury bonds (as many did with respect to Japanese holdings in the 1980s). China had a foreign exchange reserve of over $600 billion by the end of 2004, with approximately $190 billion in U.S. government securities. Its holding of U.S. Treasury bonds thus constituted about 5 percent of the U.S. government debt of $4.5 trillion and 0.7 per- cent of the total stock of U.S. financial assets of $33.4 trillion. In comparison, total foreign government hold- ings of U.S. securities (not including China) come to approximately $1 trillion, with Japan holding approxi- mately $715 billion. Hence, to raise alarm bells about Beijing’s increasing leverage over the United States (as opposed to thanking China for lending us the money) seems to represent rather stretched and convoluted logic. Competition for Global Resources Another major concern often raised in the United States is the likely impact of China’s growth on global resources. A recent study by the Washington-based Earth Policy Institute pointed out that the PRC has overtaken the United States as the world’s leading con- sumer of four of the five basic commodities; i.e., grain, meat, coal and steel. Some are warning about China’s growing thirst for the fifth of these — oil — even though China’s consumption is only one-third that of the United States (6.5 million compared to 20.4 million barrels per day in 2004). The International Herald Tribune carried an article on Feb. 19, for example, reporting that India has joined China in a “ravenous thirst for oil that now has the world’s two most populous nations bidding up energy prices and racing against each other and against global energy companies in an increasingly urgent grab for oil and natural gas fields around the world.” There is no question, of course, that China’s rapid eco- nomic growth is being reflect- ed in an increased demand for basic commodities as well as other products and services. We have already noted how this phenomenon has provided an expanding market, not only for Asia but for the United States. In fact, one of our key missions at Embassy Beijing is to encourage the further opening of this market, including that for U.S. agricultural products such as grain and meat. The fact that the PRC would now exceed the United States in the consumption of food and certain energy products should hardly be surprising, as China has over four times the population of the United States. What should be surprising is that China only barely exceeds the United States in the demand for some of these commodities: the average Chinese consumes only about one-fourth of the food and less than one- tenth of the oil consumed by the average American. Even if China’s economic growth continues at the cur- rent rate for the next 15 years, in 2020 the average Chinese would only consume half what the average American consumes today. The dire warnings of China’s “ravenous thirst” and “urgent grab” for oil and other commodities are them- selves disturbing: it is as if the efforts of a large devel- oping country like China or India to pull its population out of poverty are something less than desirable. Thus far, China is actually nearly self-sufficient in grain, meat, coal and steel. Its oil imports have been growing rapid- ly and now account for about 40 percent of the country’s total oil demand. By comparison, however, China imports less than three million barrels of oil per day, while the E.U. and the United States each import about 10 million barrels and Japan imports about six million barrels per day. To be sure, if China continues to grow at the present rate, it will eventually stretch its own resources and F O C U S 22 F O R E I G N S E R V I C E J O U R N A L / M A Y 2 0 0 5 China’s rise underscores the need for greater coordination among major governments to minimize volatility while meeting the needs of both developed and developing economies.