China is playing a brilliant long game at home and abroad, which is hugely beneficial to the dry bulk trades, argues Jeffrey Landsberg from Commodore Research.
For about 600 years, modern colonial empires around the world enjoyed great success. Common among these empires was the ability to exploit other nations’ resources, maintain huge balances of trade, and have new markets to sell their goods to. While the age of modern colonialism came to what most historians consider its end on December 20, 1999 (when Portugal relinquished Macau back to China), today China is arguably a new type of empire that is reaping many of the same benefits that history’s greatest empires enjoyed in the past.
Clearly, China has not subjugated foreign populations and has no colonies. Its influence and power is unmistakable, though, and it continues to dominate global trade, import a staggering amount of commodities, and is carrying out a large amount of infrastructure and construction projects outside of its borders — all while maintaining a huge balance of trade and holding an epic amount of foreign currency reserves.
Going forward, Commodore remains of the view that China will continue to source a growing proportion of its commodities from abroad. At the same time, China is also poised to continue carrying out a very large amount of infrastructure and industrial projects in foreign nations while also maintaining an extremely favourable trade surplus. Importing grain also remains set to serve as a Chinese proxy for importing water. Globally, it is estimated that approximately 70% of all freshwater withdrawals go to agriculture — and as shipping water from nation to nation is not practiced in earnest, the trade of agriculture remains a very effective means of water redistribution. Going forward, Commodore expects that this proxy trade will intensify considerably in upcoming years. China has approximately 18% of the world’s population, but only approximately 7% of the world’s fresh water.
History is witnessing a new type of empire, and we do not expect that this empire will relinquish its power any time soon. During the next several years, we expect that China will continue importing a larger amount of commodities while at the same time effectively exporting more pollution and also using the rest of the world as a ‘China-West’ where more of its massive industrial projects can be constructed (and where more Chinese goods can ultimately be sold to). China continues to push forward with its One Belt One Road initiative, and a large amount of industrial projects will continue to be constructed outside China. While there are only so many heavy industry projects that China can build within its own borders, China is set to continue building various industrial projects around the world and the One Belt One Road initiative is in many ways creating a China-West.
The future of China is now not only in the less developed central and western parts of China, it is also in the various nations to the west of China that have long been desperate for investment, jobs, and economic growth. This decade has continued to see China gain much more prominence globally, and the government has continued to artfully create many new construction and industrial projects outside Chinese borders. China has very successfully leveraged its infrastructure and industrial expertise (combined with its robust existing currency reserves and authoritarian wherewithal) to be able to create a gigantic new region for which to spread its massive industrial machine to. At the same time, China has continued to bring back home a growing amount of high quality commodities.
Overall, what the world is witnessing from China is awe-inspiring, and remains very beneficial for the dry bulk shipping market. In an age when colonial empires no longer exist, China is carrying out lofty projects well beyond its borders while also bringing in a growing amount of raw materials and maintaining a very large trade surplus.
This article first appeared in the latest issue of Maritime CEO magazine, which launched today. Splash readers can access the full magazine for free by clicking here.