Feeding the hungry dragon

MY WORD!

It has been described as the largest shopping spree in the history of the world. That might seem like a hyperbole on a global scale.

But consider some telling facts: on Wednesday, copper prices zoomed to an eight-year high on the London Metal Exchange. For the last few months, the prices of nickel, lead, zinc and even soyabeans have been shooting through the roof to new highs.

What's the common factor that's sending the prices of every commodity, from soyabeans to copper, into the stratosphere? Yep. You guessed right: China.

As the 1.3 billion people of the Middle Kingdom move to the starter's line in the race to modernise, they are having an extraordinary impact on the world economy "" and this could be just the beginning.

China is now the world's largest consumer of copper, iron ore, platinum and zinc. Zooming commodity prices are boosting countries as far apart as Australia, Chile, Brazil and Argentina.

We all know what the Chinese have been doing to world of steel. But it isn't only the steel companies that are raking in the profits. On Thursday, Anglo-Australian minerals giant BHP Billiton, announced that profits had shot up by 41 per cent. BHP Billiton owns the world's largest copper mine and also has substantial interests in nickel.

What else will the Chinese need in the coming years? Well, let's start with oil. In 2003, China imported more crude oil than Japan, and this is poised to climb much higher.

In December, China's crude oil imports climbed by nearly 80 per cent from the year before. Russian oil giant Yukos is one company that's hoping to rake in the cash as the Chinese become the world's oil guzzlers.

There are plans to transport 12 million tonnes of oil by rail from Russia to China by 2006. That will be up from 3 million tonnes in 2003. By 2025 there may be more cars on Chinese roads than in the US.

Or, take a look at petrochemicals. For the last few years the petrochemicals industry has been plagued by overcapacity and resultant falling prices. Now the petrochemicals industry is looking forward to the possibility of boom times once again.

Says one analyst: "Everything was lined up against the industry. We had overcapacity, a lack of profits, closures." Now, after whipping out their calculators, the analysts reckon that China will, by 2010, be the world's second largest user of plastics after the United States.

Come closer home, and most of South- east Asia has benefited from the Chinese behemoth. In fact, China has taken over from Japan as the locomotive that is tugging Asia behind it.

In 2003, two-way trade between China and the Asean countries climbed by 42 per cent from the year before. Every country in the region from Malaysia to Singapore is now heavily dependent on this trade.

How will India be affected by a booming China? Earlier this week, Ratan Tata was in China and scores of other large Indian companies are shedding their fears of foreign travel and seriously looking at the Dragon Kingdom.

More importantly, however, will be the demonstration effect as the Chinese race to prosperity. Every analyst in the world must now be looking at India and working out the figures. Has the same helter-skelter race to prosperity already begun in this country? Can the giant multinationals afford to stay away from the sub-continent?

At another level, as standards of living rise in China, what will be the impact on the world economy in the next two decades? Will commodity prices spiral out of control and start to hurt countries around the globe? Chinese demand coupled with surprising discipline levels among OPEC countries are already sending crude oil prices northwards.

When you look at it that way, could this be the environmental nightmare that the Greens have always gloomily predicted? As countries like China and India and scores of other smaller ones race to prosperity, will the world start to run out of a string of commodities?

Whatever happens, it's sure that this century is going to look very different from the one that has just past into history. Let's just hope that it will look better.