The Dragon's Long Game

Thursday, December 12, 2024 China, Politics, Economics

This post is somewhat different to my usual reflections, but over the past seven years of sailing through Southeast Asia, Africa, South America, and now Europe, a stark reality has become increasingly apparent. As the Year of the Dragon draws to a close it seems appropriate to reflect on some important mistakes I believe the West is making.

Everywhere in the ports of Asia, Africa and the bits of South America that I have seen, China, through its ambitious Belt and Road Initiative (BRI), has been quietly but aggressively positioning itself as a dominant player in the global resource market. This strategic maneuvering stands in sharp contrast to the West's complacency, highlighting a critical divergence in long-term geopolitical thinking.

China has shown special interest in several critical minerals due to their importance in high-tech industries, renewable energy technologies, and strategic applications. A bit of research reveals the key minerals China is focused on:

Rare Earth Elements (REEs): China dominates the global REE market, accounting for 60% of global production and 85% of processing capacity. REEs are crucial for electronics, magnets, and defense technologies.
Cobalt: Chinese companies control about 40% of cobalt mining output in the Democratic Republic of Congo, which produces 70% of the world's cobalt. Cobalt is essential for lithium-ion batteries.
Lithium: In 2022, Chinese companies owned or had significant stakes in 41% of global lithium production. Lithium is critical for electric vehicle batteries and energy storage systems.
Germanium: China is the world's leading producer of germanium, used in fiber optics and infrared optics.
Graphite: China dominates the global graphite market, which is crucial for EV batteries and other energy storage applications.
Tungsten: China is the world's largest producer of tungsten, used in various industrial and military applications.
Gallium: China has a near-monopoly on gallium production, which is used in semiconductors and 5G technology.
Indium: China is a major producer of indium, used in touchscreens and solar panels.
Nickel: China has been actively investing in nickel mining operations, particularly in Indonesia, to secure supplies for EV batteries.
Copper: China has made significant investments in copper mines worldwide, as copper is essential for electrical infrastructure and renewable energy systems.

China's Resource Acquisition Strategy

At the heart of China's approach is a multifaceted strategy aimed at securing access to primary resources crucial for future technological and economic dominance. The BRI, often touted as a modern Silk Road, serves as a vehicle for this resource acquisition plan. By investing heavily in infrastructure projects across developing nations, China has effectively created a web of economic dependencies and political alliances.

Key Elements of China's Strategy

The BRI is elegantly simple:

Infrastructure Development: China funds and constructs roads, ports, and railways in resource-rich countries, facilitating easier extraction and transportation of valuable materials.
Diplomatic Charm Offensive: Beijing has cultivated strong relationships with local powerbrokers and government officials, ensuring preferential treatment and access to resources.
Focus on Critical Minerals: China has shown particular interest in securing elements crucial for high-tech industries and renewable energy technologies.

The West's Short-Sighted Approach

While China plays the long game, Western nations appear to be caught in a cycle of short-term thinking. The democratic process, with its focus on election cycles, often precludes the kind of decades-long planning that China's authoritarian system allows. This disparity is evident in the lack of concerted Western efforts to counter China's resource acquisition strategy.

The West has focused on eliminating mining and other heavy industries, especially those that pollute. Instead of developing less polluting extraction and refining techniques political pressures have caused the West to simply export that pollution to other countries, especially Asia.

Climate Change: A Pragmatic Perspective

Interestingly, China's approach to climate change seems to diverge from the Western narrative. Rather than focusing solely on mitigation efforts, Beijing appears to be preparing for a world where significant climate impacts are inevitable. This pragmatic stance is reflected in their resource acquisition strategy, which positions China to thrive in a resource-constrained future.

Implications for the Future

The ramifications of China's strategy are profound. As the world transitions towards renewable energy and high-tech industries, control over critical minerals and rare earths will translate into significant economic and political leverage. The West's inaction has lead to a situation where it finds itself dependent on China for essential resources. Is that a bad thing? In my opinion, only if the West decides to declare China some kind of enemy as, it seems, the Americans have done. In a better world the West would find some way to cooperate and leverage what China has achieved, to it’s own best advantage.

In conclusion, China's global resource strategy represents a masterclass in long-term geopolitical planning. As the year draws to a close, the dragon seems to have secured its grip on the world's critical resources and the West plays catch-up in a game where China has already claimed a significant head start.