Reason Behind China's Secret Commodity Stockpiles (image@Pixabay)
Reportedly, over the past two years, China has amassed huge amounts of raw materials. The country’s population has grown bigger and richer, demanding more dairy, grain, and meat. Beijing’s industries have been voracious for energy and metals. In recent years, the economy has suffered from political mismanagement and a property crisis. The Chinese officials are dead set that they want to shift away from resource-intensive industries.
According to The Economist, the logic dictates that the country’s appetite for commodities should be shrinking fast. It also points that it is not what is happening. The report said Beijing’s imports of the many basic resources broke records, and has surged 16 percentage in volume terms. It continues to grow and went up by 6 percent in the first five months of 2024.
However, looking at Beijing’s grapple with economic crisis, growing consumption cannot be traced vividly. Instead, the country appears to be stockpiling materials at rapid pace. Notably, this is at a time when commodities are expensive. Policymakers in China seem to be worried about new geopolitical threats, including the possibility of a new, hawkish American president who would try to block crucial supply routes to China.
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Since China heavily depends on foreign resources, fear is warranted. Though Beijing is the refining centre for many metals, the country imports much of the raw materials required, ranging from 70 percent bauxite to 97 percent of cobalt. Lights in China still shines on imported energy.
While China has a lot of coal, it does not have any other fuels that are required to meet its needs. This situation forces the country to bring in 40 percent of its natural gas and 70 percent of its crude oil. The country’s dependency for food is more acute. In 2000, what almost every citizen ate was produced at home. Today, the count went down to two-third.
As per the report, China imports 85 percent of the 125 tonnes a year of soya beans it uses to feed the 400 m pigs. The country relies on foreign farmers on items like coffee, palm oil, and some dairy products.
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The country identified its vulnerability at started with “strategic” stockpiling of things. Three recent events have prompted China to bolster the process. In 2018, US President Donald Trump imposed tariffs on Chinese exports worth $60 billion a year, forcing Beijing to retaliate by slapping duties on American soya beans. Then Covid-19 happened, which disrupted supply chains and raised costs of materials. The war in Ukraine also played a role. It inflated prices and showed America’s will to use embargoes.
Now, as US Presidential election is nearing, with Trump – who made it no secret of his desire to thwart China- having high potential to win the race, Beijing is on alert. Washington could restrict its own food exports to China, and rely on other big suppliers like Argentina and Brazil to do the same. US can also influence the countries that sell metal to China, including Australia and Chile. The report said that China’s commodity imports are shipped through a few straits and Canals that US could seek to block by posting military ships nearby.
(With inputs from The Economist)
