China's Emergence As A Global Superpower
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gingko_1986
Registered Member
To my surprise, Americans are so worried about this problem. Why? It's only testify that China's progress come to front and Americans don't want to lost your luxurious lives.Maybe China will overtake America in many many years, but so what will be happen? A nuke War? It's too boloney.
Some facts:
* China’s economy has been growing at a rate of 9.3% per year during the past 25 years, which is three times as much as the growth rate in the U.S.
* China is the world’s biggest consumer of steel, cement, coal, copper, gold and even meat. It is the number two crude oil consumer.
* China is also the world’s biggest market for mobile phones, with close to 400 million handsets and cellular phone accounts.
* Since 2002, China is the driving force behind the big commodity boom. Prices of oil, copper, gasoline, aluminum and other raw materials more than doubled. The Goldman Sachs Commodity Index is up 180% since 2002.
* The central banks of China, Hong Kong and Taiwan - which make up the Greater China region - combined have the largest foreign reserve in the world.
* The Hong Kong’s H Share Index, which is made up of higher quality companies from Mainland China, is up 170%, versus 36% for the S&P 500 Index since 2003.
FROM:
http://www.chinaprofitstrategy.com/..._sid=6GL126&dmi_eid=frerpt&dmi_sid_pay=6GL127
Taiwan born Robert Hsu was: A hedge fund portfolio manager at Goldman Sachs, and managed to amass a seven-figure personal nest egg by the time he turned 30. In 2004 he started my own shop - Absolute Return Capital Advisors, LLC., - a money management firm that applies hedge fund strategies to traditional managed accounts. He also provides China Strategy service.
BillyT adds (from CNN last night and his anallysis):
In 10years or less China's oil use will double, I.e. us more than the US is currently by wide margin and CNN's experts predict oil porduction will be less.
I am revising upwards my prior estimates that oil will soon be $150/barrel to $200/barrle but continuing to point out that the US's suburban infrastructure (including the gas hogs that support it) can not change this quickly. So yes soon China will pass US, but not by China's 10% annual growth alone. A big part will be the rapid decline of the US becuase its infrastructure is the worst in the world to cope with $200/barrel oil.
It is also interesting to note that Wal-Mart alone is the 8th largest "trading partner" of China, ahead of even neighbor Australia!
* China’s economy has been growing at a rate of 9.3% per year during the past 25 years, which is three times as much as the growth rate in the U.S.
* China is the world’s biggest consumer of steel, cement, coal, copper, gold and even meat. It is the number two crude oil consumer.
* China is also the world’s biggest market for mobile phones, with close to 400 million handsets and cellular phone accounts.
* Since 2002, China is the driving force behind the big commodity boom. Prices of oil, copper, gasoline, aluminum and other raw materials more than doubled. The Goldman Sachs Commodity Index is up 180% since 2002.
* The central banks of China, Hong Kong and Taiwan - which make up the Greater China region - combined have the largest foreign reserve in the world.
* The Hong Kong’s H Share Index, which is made up of higher quality companies from Mainland China, is up 170%, versus 36% for the S&P 500 Index since 2003.
FROM:
http://www.chinaprofitstrategy.com/..._sid=6GL126&dmi_eid=frerpt&dmi_sid_pay=6GL127
Taiwan born Robert Hsu was: A hedge fund portfolio manager at Goldman Sachs, and managed to amass a seven-figure personal nest egg by the time he turned 30. In 2004 he started my own shop - Absolute Return Capital Advisors, LLC., - a money management firm that applies hedge fund strategies to traditional managed accounts. He also provides China Strategy service.
BillyT adds (from CNN last night and his anallysis):
In 10years or less China's oil use will double, I.e. us more than the US is currently by wide margin and CNN's experts predict oil porduction will be less.
I am revising upwards my prior estimates that oil will soon be $150/barrel to $200/barrle but continuing to point out that the US's suburban infrastructure (including the gas hogs that support it) can not change this quickly. So yes soon China will pass US, but not by China's 10% annual growth alone. A big part will be the rapid decline of the US becuase its infrastructure is the worst in the world to cope with $200/barrel oil.
It is also interesting to note that Wal-Mart alone is the 8th largest "trading partner" of China, ahead of even neighbor Australia!
Carcano
Valued Senior Member
Two Questions:
1. Isn't the price of gas in the US highly subsidized. I read in Discover magazine that if it wasn't subsidized the price would be over $10/gallon?
2. Is the price of gas the same in China as it is in the US? Can the Chinese afford to buy any gas at $150/barrell rates?
1. Isn't the price of gas in the US highly subsidized. I read in Discover magazine that if it wasn't subsidized the price would be over $10/gallon?
2. Is the price of gas the same in China as it is in the US? Can the Chinese afford to buy any gas at $150/barrell rates?
1) No, but it is not taxed as much as it is in most countries. I do not remember exact value, but a "barrel" for gas is smaller that the standard 55 gallon drum. I think it is about 40 or 45 gallons. For convenient illustration, lets guess 42 as then $70/barrel would mean $10 buy six gallons of crude. Also lets guess that with "cracking" etc., one can get 4 gallons of stuff that is legally "gas" out of those 6 gallons.Carcano said:
That would imply $2.50/gallon gas cost if there were no other costs or profits. Thus, very crudely when oil is $70/ barrel gas at the pump should be about $3/gallon (There may something slightly wrong in my guesses as the tax was about $0.11/gallon in US when I lived there 12 years ago, so that would raise the pump price to about $3.11/gallon or perhaps the profit and other costs are less than $0.50 / gallon. Is the gas now above $3/gallon now in US or rapidly adjusting to that area?) The point was to show than there is no subsides bringing the "true cost" down from your $10/ gallon.
2) Each individual Chinese will be buying much less gas than the average American, but in ten years, there may be as many cars as in America. Like the cars in Brazil, they will be lighter and smaller, but still hold four people. (Not fat ones, but that is mainly a US problem.) The use of public transport is higher almost everywhere compared to America, certainly will be in a more strongly planned economy like China's.
The Chinese government will be importing the oil. They are much better off than the US with large net trade surpluses they can use. (More than 200 billion annually of which the US sends to them.) The US is government debt is currently 65% of its GDP and increased by more than $800Billion last year.- With interest rates rising, and the trends of last few years continuing it will only be a few years until US debt is 100% of GDP - that will not happen - US will collapse first.
Summary: China can better afford $200/ barrel oil than the US. It has a better infrastructure (bicycles and public transport, plus few suburban homes and gas hogs) for high priced oil and not so deep in debt. The US GDP "growth will be like -!0% and the Chinese like +3% per year I would guess when oil is $200/barrel. China also has many nuclear power plants and is currently building 30 more. US has not built one in more than 30 years. What is going to happen is clear to anyone who thinks.
Note this post contains very crude model of debt increase, essentially equating it to the trade deficit. It also has neglected the important fact that increase in energy cost will reduce GDP and this may be as important as the increased interest cost on the old debt higher interest rates will cause. I.e. the ratio of debt to GDP will increase rapidly. No one will lend US more when that ratio is approaching 100%. Basically the US may already be past the point from which it can avoid collapse.
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Billy T said:
It is in California and other expensive places; probably more like $2.75 in most of the country.
Billy T said:
China no longer has a centrally planned economy, they have a market economy. That's why they've enjoyed strong growth the past few decades. Moreover, China is not known for its extensive public transport. All major cities in China are currently plagued by huge traffic jams, as the number of private cars has been going through the roof lately. This is why the government has been frantically trying to get more public transport installed. As you say, there will soon be as many cars in China as in the US: that adds up to LESS dependence on public transport, not MORE. It should be emphasized that the alternative to a car in China is not public transport: it's a bicycle. (Hong Kong is perhaps an exception to this).
Billy T said:
Ah, but if they spend that 200 billion on anything other than US Treasury notes, the yuan will shoot up relative to the dollar and the trade surplus will disappear.
Billy T said:
I don't see the relevance of this. The US government is not the entity that buys the oil: that's all done by private entities in the US.
Billy T said:
Why would that make the US collapse? It's not at all unheard-of for developed countries to run debts that exceed their GDP: Japan's debt is like 175% GDP, and has been in that range for decades. And yet Japan has not collapsed. Greece, Italy, Singapore and Belgium all have debts around 100% GDP.
Moreover, rising US interest rates will prompt rising US savings, which will diminish the trade decifit and take a big bite out of China's surplusses.
Yes the growing parts are mostly the private sector, but I think the more public service things, like water, trash pick up, public transport etc., are all still state enterprises.quadraphonics said:
I saw last night on CNN a program that briefly showed 3 or 4 lanes of slow moving traffic - not a car was to be seen. It was all trucks or buses. There is no way that China can avoid greatly expanding public transport - even if they need to let private bus companies begin to operate busses. They can (and do) learn from the US's mistakes.
No, they can send out lots of freshly printed Yuan to buy copper, oil, iron ore etc. - Yuan might even go down in value, if they do too much of this.quadraphonics said:
You are assuming the world will always want to hold and only accept dollars. I am assuming just the opposite. US debt is too great and growing too fast for your assumption to remain valid much longer. I, and many like me, are already trying to get out of dollars, while they still have value. Almost all central banks are getting out of dollars as quietly as they can.* The actual need for commodities has not doubled since start of 2005 but the price has. - What has changed is the speculation that they will hold their value much more than the dollar will.
Why can China not pay for the iron ore it is getting from Brazil in Yuan when the world is tring to get out of dollars? Brazilians already are needing more Yuan every year and less dollars (Trade with China was up 33% last year, but US is still Brazil's largest trade partner.) More of the high tech imports (cell phones, TV, digital cameras etc, soon even cars) are coming from China. Venezuela and Iran will surely sell oil for Yuan, very soon. The US recently stopped Venezuela from buying some fighter plane trainers from Brazil. (They contained some electronics that required US permission by prior agreement.) Chavez is buying them from China instead. I think paying in oil but could be Yuan already. China does not need to sell to Wal Mart/ US to run a trade surpluss. - With its rapidly expanding production, it can make large demand for Yuan and print them just as US has made demand and printed dollars for years. Defend you assumption or at least attack mine. Where in the laws of economics does it state all trade must be in dollars?
--------------------------
*There are lots of ways to do this. For example, Brazil took the dollars it had in reserve and paid off the debt to the IMF last year. This year it will pay off all the Bradie bond debt, even though it is not due until 2024. $3.7 Billion of it has been paid already this year and the total (20billion dollars) will be all paid by year's end. Brazil does not want to get stuck holding a bag of low value dollars. Most central banks are doing the same, for the same reason. The little guy, with some in his mattresess, (or bank account) is who will end up holding the worthless bag. Perhaps the IMF etc will also get stuck holding the bag - there is little demand for dollar loans anymore and the dollars of old loans are returning.
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I don't recall assuming that all trade must be dollar denominated. I'll start at the beginning to be clear: China has a large trade surplus with the US, as well as a fairly large total surplus. Note that the bilateral surplus with the US is *twice* China's net trade surplus ($200 Billion per year vs. $100 Billion). This means China has $100 Billion to spend every year, not $200 Billion, and moreover that their trade surplus is heavily dependent on US demand. If the China-US bilateral trade imbalance were to reduce to $100 Billion annually (which is still a huge surplus for China), the net Chinese trade surplus would vanish.
So, the big picture is that China has a bunch of factories. They import raw materials and textiles, use the factories to make them into products, and trade these products with Americans for dollars. At the end of the year, China finds it has $100 Billion more dollars than it did when it started, and must decide what to do with them. One option would be to buy dollar-denominated commodities; this could be US products, oil, or whatever. If it does this, the number of dollars in circulation will increase, and this will cause inflation; i.e., the dollar will go down in value. This effect will counteract the trade imbalance with the US, and China will quickly find it has no more extra dollars to spend. The only way to preserve the stream of dollars is to save a lot of them, and this is exactly what China has done. Now that they have a huge foreign reserve of $800+ Billion dollars (essentially all of their trade surplus from the past several years), any actions that would drastically devalue the dollar would be idiotic. It would amount to having given America all those products over the years in exchange for nothing.
So, with that in mind, here is what will actually happen. China is nearing the point where it has sufficient dollar reserves, and won't want to save so much anymore. So, they'll buy more stuff instead, which will change the relative values of the dollar and yuan, and correct the trade balance. This will be done slowly to avoid destabilizing either currency, which is bad for everyone. To keep the GDP from falling will require offsetting a decline in foreign demand with domestic demand; this is why the imperative in the last decade has been the cultivation of a middle class. On the American side, the resulting inflation and decreased demand for T-Bills will push interest rates up, and spur a higher savings rate. This will do a lot to correct America's trade deficit, as well as increase investment in productive infrastructure. Unless of course some other large country wants to finance US consumption in order to build up their production infrastructure.... Inida or Indonesia, perhaps?
As far as trading in Yuan goes, of course there's no economic reason why it can't be done. However, the Chinese government keeps a very tight leash on the Yuan, with strict limits on how much people and businesses can spend abroad. So it's kind of pointless to speculate about until the CCP adopts a fundamentally different approach to monetary policy. Right now they seem to want to keep foreigners out of the whole picture, which precludes it from being an international trade currency.
So, the big picture is that China has a bunch of factories. They import raw materials and textiles, use the factories to make them into products, and trade these products with Americans for dollars. At the end of the year, China finds it has $100 Billion more dollars than it did when it started, and must decide what to do with them. One option would be to buy dollar-denominated commodities; this could be US products, oil, or whatever. If it does this, the number of dollars in circulation will increase, and this will cause inflation; i.e., the dollar will go down in value. This effect will counteract the trade imbalance with the US, and China will quickly find it has no more extra dollars to spend. The only way to preserve the stream of dollars is to save a lot of them, and this is exactly what China has done. Now that they have a huge foreign reserve of $800+ Billion dollars (essentially all of their trade surplus from the past several years), any actions that would drastically devalue the dollar would be idiotic. It would amount to having given America all those products over the years in exchange for nothing.
So, with that in mind, here is what will actually happen. China is nearing the point where it has sufficient dollar reserves, and won't want to save so much anymore. So, they'll buy more stuff instead, which will change the relative values of the dollar and yuan, and correct the trade balance. This will be done slowly to avoid destabilizing either currency, which is bad for everyone. To keep the GDP from falling will require offsetting a decline in foreign demand with domestic demand; this is why the imperative in the last decade has been the cultivation of a middle class. On the American side, the resulting inflation and decreased demand for T-Bills will push interest rates up, and spur a higher savings rate. This will do a lot to correct America's trade deficit, as well as increase investment in productive infrastructure. Unless of course some other large country wants to finance US consumption in order to build up their production infrastructure.... Inida or Indonesia, perhaps?
As far as trading in Yuan goes, of course there's no economic reason why it can't be done. However, the Chinese government keeps a very tight leash on the Yuan, with strict limits on how much people and businesses can spend abroad. So it's kind of pointless to speculate about until the CCP adopts a fundamentally different approach to monetary policy. Right now they seem to want to keep foreigners out of the whole picture, which precludes it from being an international trade currency.
To quadphonics:
Thanks for your excellent summary post. You make a strong case, but I do have a few counter comments, perhaps none strong enough to be called "killer objections" or "firm rebuttals." (Predicting the future is not quite a science.) Your first paragraph is very informative and perceptive. BUT:
If (1) China sells less to US (and I think you agree with me that this is surely going to happen, for several different reasons.) and (2) China does NOT improve the "deals" it is making with the rest of the world, then "yes" China, like US, will have less economic power as the years go by. (Yuan, like the dollar, may weaken instead of grow stronger as US would like. -I.e. both Dollar & Yuan dropping relative to currencies of food stuff and raw materials exporters like Brazil.) BUT:
I expect that China will be able to improve* its foreign trade "deals." {I.e. that (2) above is false.} I also think China (and others too) will recycle less dollars back to US buying Treasuries (keeping them out of circulation), unless US interest rates rise to attract them (compensate for an increasing perceived risk that the dollar's value will drop.) Thus, I expect the FED's recent news release is "whistling past the graveyard." - I.e. I expect that the next rate hike will be far from the last. If this is correct, the cost of production in the US will rise and US competitiveness in trade will drop because of this interest cost effect.
I also foresee that US will steadily become relatively less competitive because of rising energy costs. (More so than other countries as the US infrastructure is the most badly designed for high cost oil). The relative high cost of US labor will also continue and "out sourcing," which is already in progress because of this, will accelerate. (In a decade or so, perhaps only non exportable jobs, like pizza delivery and cutting someone's hair, will remain in US. All the US automakers will be bankrupt, etc. India's Tata Motors will be exporting a no-rust, four-passenger, gas-efficient, plastic car capable of at least 60mph for $2,200 from the factory now being built! - My ADRs in them are up three fold, in about 6 months, as others recognize what this means. It has been very profitable to think before others that the dollar is doomed.) Oil will be sold in several currencies. etc. What will make anyone want dollars? (Unless you are living in US and need your hair cut or a pizza delivered.
) More reasons why US interest rate will continue to rise as that will be the main reason to want or hold dollars.
Inflation, if interest rates do not rise, would be the natural result as many "mattresses dollars" return into circulation. That is already happening. (More dollars are in Russian mattresses and coffee cans than all that circulate in the US. There are quite a few in Brazil also, and most every country that has a history of strong inflation, but as the perception that the dollar may no longer be a secure store of value spreads, they are entering circulation again.) Perhaps more important, as I mentioned in last post, central banks are already holding less dollars in their reserves. All of this also forces higher US rates and lowers US competitiveness. (The US got a dollar's worth of value for the few pennies it cost to print these "mattresses dollars" and now must "pay the piper" as they come back into circulation, either by allowing inflation or by higher rates and lower economic productivity, or a combination of both.)
I think you are thinking too much in bilateral terms only. Yes, if the world were only US and China, and US imports from China drop (relative to US exports to China) then it is true the dollar would strengthen, US interest rates would not need to rise, etc. but there is more to it than this bilateral world. Instead, I think China will greatly increase its trade with the "third world," locking up supplies of raw material in 25-year long contracts etc, as it is already doing. (No private company signs such long-term contracts.) The US will increasingly be of less and less significance in global trade. It will be reduced to a supplier of food stocks (US does have great agricultural production capacity.) and a tourist attraction center, where people can visit (getting their haircut and a pizza, of course. )
From your first paragraph: "net Chinese trade surplus would vanish."
My reply, from above and footnote examples below: "Not necessarily so."
SUMMARY: The dollar is doomed, but the Yuan may not be. In a decade or two, it may be what the dollar is today. - The international currency of trade and the safest store of value to stuff in your mattresses, if you fear local currency inflation. As you said, the Chinese are very careful to control Yuan. And as I said, they learn from the US's mistakes. China will never allow more Yuan to be outside of China than at home, as US has.
----------------------------------------
*China's leaders are very new at the "capitalist game," but learning fast. For example, last year they signed a 25year contract with Brazil & Val do Rio Docie (largest exporter of iron ore in world) but iron ore, like all commodities, has greatly increased in price in one year as people, like me, flee from the dollar, so Brazil and Val said that a 70% increase in the price would be required a few months ago. China responded a couple of weeks ago with a long-term contract with Rio Tinto, large Austrian producer of many minerals and world's second largest iron ore exporter.
Last year they pulled a trick on Brazil that would warm the heart of any capitalist with admiration: Several boats full of soybeans were not allowed to unload as the Chinese inspectors found that a few of the beans were the genetically modified type, not permitted under the contract.
Boats cost tens of thousands of dollars each day, just sitting in the harbor. The Chinese got the price of the soybeans greatly reduced before accepting the "defective product." (Brazil learned too. - Now the GM soybeans are not shipped thru the same port terminals as the un-modified beans.)
I am sure (2) above soon will be false, if it is not already. I.e. China, with its great buying power, will negotiate better deals and show a trade surpluses with the rest of the world also. Perhaps even in 2006 but surely in 2007. They are learning fast how capitalism works. - I.e. If you have power and wealth, use it to get more of the same. ---The rich get richer and the poor get poorer (relatively, at least, if not in absolute terms.) - A great system if you are rich and not a bad one if you are poor in a land of increasing productivity, which the US has been, but that may be about to change as GM etc closes and US switches to be mainly a supplier of agricultural products, hair cutting, pizza delivery and other local services.
Thanks for your excellent summary post. You make a strong case, but I do have a few counter comments, perhaps none strong enough to be called "killer objections" or "firm rebuttals." (Predicting the future is not quite a science.) Your first paragraph is very informative and perceptive. BUT:
If (1) China sells less to US (and I think you agree with me that this is surely going to happen, for several different reasons.) and (2) China does NOT improve the "deals" it is making with the rest of the world, then "yes" China, like US, will have less economic power as the years go by. (Yuan, like the dollar, may weaken instead of grow stronger as US would like. -I.e. both Dollar & Yuan dropping relative to currencies of food stuff and raw materials exporters like Brazil.) BUT:
I expect that China will be able to improve* its foreign trade "deals." {I.e. that (2) above is false.} I also think China (and others too) will recycle less dollars back to US buying Treasuries (keeping them out of circulation), unless US interest rates rise to attract them (compensate for an increasing perceived risk that the dollar's value will drop.) Thus, I expect the FED's recent news release is "whistling past the graveyard." - I.e. I expect that the next rate hike will be far from the last. If this is correct, the cost of production in the US will rise and US competitiveness in trade will drop because of this interest cost effect.
I also foresee that US will steadily become relatively less competitive because of rising energy costs. (More so than other countries as the US infrastructure is the most badly designed for high cost oil). The relative high cost of US labor will also continue and "out sourcing," which is already in progress because of this, will accelerate. (In a decade or so, perhaps only non exportable jobs, like pizza delivery and cutting someone's hair, will remain in US. All the US automakers will be bankrupt, etc. India's Tata Motors will be exporting a no-rust, four-passenger, gas-efficient, plastic car capable of at least 60mph for $2,200 from the factory now being built! - My ADRs in them are up three fold, in about 6 months, as others recognize what this means. It has been very profitable to think before others that the dollar is doomed.) Oil will be sold in several currencies. etc. What will make anyone want dollars? (Unless you are living in US and need your hair cut or a pizza delivered.
) More reasons why US interest rate will continue to rise as that will be the main reason to want or hold dollars.Inflation, if interest rates do not rise, would be the natural result as many "mattresses dollars" return into circulation. That is already happening. (More dollars are in Russian mattresses and coffee cans than all that circulate in the US. There are quite a few in Brazil also, and most every country that has a history of strong inflation, but as the perception that the dollar may no longer be a secure store of value spreads, they are entering circulation again.) Perhaps more important, as I mentioned in last post, central banks are already holding less dollars in their reserves. All of this also forces higher US rates and lowers US competitiveness. (The US got a dollar's worth of value for the few pennies it cost to print these "mattresses dollars" and now must "pay the piper" as they come back into circulation, either by allowing inflation or by higher rates and lower economic productivity, or a combination of both.)
I think you are thinking too much in bilateral terms only. Yes, if the world were only US and China, and US imports from China drop (relative to US exports to China) then it is true the dollar would strengthen, US interest rates would not need to rise, etc. but there is more to it than this bilateral world. Instead, I think China will greatly increase its trade with the "third world," locking up supplies of raw material in 25-year long contracts etc, as it is already doing. (No private company signs such long-term contracts.) The US will increasingly be of less and less significance in global trade. It will be reduced to a supplier of food stocks (US does have great agricultural production capacity.) and a tourist attraction center, where people can visit (getting their haircut and a pizza, of course.
)From your first paragraph: "net Chinese trade surplus would vanish."
My reply, from above and footnote examples below: "Not necessarily so."
SUMMARY: The dollar is doomed, but the Yuan may not be. In a decade or two, it may be what the dollar is today. - The international currency of trade and the safest store of value to stuff in your mattresses, if you fear local currency inflation. As you said, the Chinese are very careful to control Yuan. And as I said, they learn from the US's mistakes. China will never allow more Yuan to be outside of China than at home, as US has.
----------------------------------------
*China's leaders are very new at the "capitalist game," but learning fast. For example, last year they signed a 25year contract with Brazil & Val do Rio Docie (largest exporter of iron ore in world) but iron ore, like all commodities, has greatly increased in price in one year as people, like me, flee from the dollar, so Brazil and Val said that a 70% increase in the price would be required a few months ago. China responded a couple of weeks ago with a long-term contract with Rio Tinto, large Austrian producer of many minerals and world's second largest iron ore exporter.
Last year they pulled a trick on Brazil that would warm the heart of any capitalist with admiration: Several boats full of soybeans were not allowed to unload as the Chinese inspectors found that a few of the beans were the genetically modified type, not permitted under the contract.
Boats cost tens of thousands of dollars each day, just sitting in the harbor. The Chinese got the price of the soybeans greatly reduced before accepting the "defective product." (Brazil learned too. - Now the GM soybeans are not shipped thru the same port terminals as the un-modified beans.)
I am sure (2) above soon will be false, if it is not already. I.e. China, with its great buying power, will negotiate better deals and show a trade surpluses with the rest of the world also. Perhaps even in 2006 but surely in 2007. They are learning fast how capitalism works. - I.e. If you have power and wealth, use it to get more of the same. ---The rich get richer and the poor get poorer (relatively, at least, if not in absolute terms.) - A great system if you are rich and not a bad one if you are poor in a land of increasing productivity, which the US has been, but that may be about to change as GM etc closes and US switches to be mainly a supplier of agricultural products, hair cutting, pizza delivery and other local services.
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Billy T said:
Rising interest rates certainly won't help the cost of production, but you have to keep in mind where the US is operating right now. Interest rates having been coming up and will probably continue to do so, but from historically low levels (around 1%). Although they've been raised for i-forget-how-many quarters in a row, they're still a ways below the historical average (4.5% vs. 6%). So I don't see a huge impact on cost of production. In any case, I was only addressing the bilateral trade balance between China and the US, not overall US competitiveness. An increase in American savings levels and Chinese consumption (which is what everyone is expecting), will have a strong supply-and-demand effect on the trade balance, decreasing American imports of Chinese goods, and boosting Chinese imports of American goods. Fluctuations in the relative cost of production won't really matter, since all of the low-cost production is already located in China. Americans will buy fewer clothes, appliances and toys from China, and Chinese will buy more products from Intel, Motorola, Qualcomm and Microsoft.
Billy T said:
We've already discussed how the energy intensity of the Chinese economy is much higher than that of America. Rising energy costs will affect America LESS than China. Americans may drive to work, but they don't work in energy-hungry factories.
Billy T said:
Well, I *thought* we were discussing the trade balance between the US and China.
Billy T said:
I fail to see how China *importing* huge amounts of stuff from third-world countries is going to increase China's trade surplus.
Did not reproduce all your first paragraph as the omitted part is all true, but sort of implying that interest rates will peak around 6% or less, where as I expect them to easily top 10% as people get scared that the dollar's debt never will be paid, except by printing press money. We will just have to agree to disagree for now and see who was right later. (Say by mid 2016, so I do not have an "open-ended" advantage on you.)
The Chinese will, and are, replacing the old inefficient factories. Mao, with his nonsense of a steel smelter in everyone's backyard, did great damage to China, but that was years ago and China is rapidly increasing efficiency. - I bet that in 2016 their energy consumption per unit of production will be half what it is today and some sectors will be even more efficient than the US is because they are making new plants in an era when all recognize that energy efficiency is critical, whereas the US is closing plants (not making any new ones), but this does help.
For example, Ford recently said it would close 14 of the older, "less efficient" plants but it was not clear in article I read, if this referred to production per man-hour or per unit of energy. I suspect it was the former, mainly, but that as cost of energy goes up, the more energy efficient plants will be the last in the US to shut down, so average efficiency in US will also be rising, but not nearly as rapidly as in China.
Almost all the world now prefers to buy from anyone other than America, if it is possible. China and India et. al. are rapidly gearing up to make it possible. As I said in prior post, in a few years no one will need (or want) America's high-cost labor's products. Only in agriculture will America be competitive. A few like my wife, refusing to drink even free coke cola at parties are extreme, but many share her views, in large part to GBW's policies and given a choice, may pay even slightly more for "not made in the USA," but generally "not made in the USA" will be cheaper also. America's fate is to become an agricultural colony of China.
Why do you think these international corporations will still be active in US? I do not remember the number exactly (was it 30,000 new employees)? that Bill gates said during his recent visit to India was his planned expansion of employment there. Why should any of the companies you named still have any operations in the US a decade hence? Certainly, what they do is very easily “out sourced.” India alone is producing several times as many software engineers as the US is and they are good.quadraphonics said:
Also true, TODAY. In less than a decade China will have much more hydro power and 30 new nuclear power plants - the US will have no new ones for at least a dozen years and some of the existing ones will be closed.quadraphonics said:
The Chinese will, and are, replacing the old inefficient factories. Mao, with his nonsense of a steel smelter in everyone's backyard, did great damage to China, but that was years ago and China is rapidly increasing efficiency. - I bet that in 2016 their energy consumption per unit of production will be half what it is today and some sectors will be even more efficient than the US is because they are making new plants in an era when all recognize that energy efficiency is critical, whereas the US is closing plants (not making any new ones), but this does help.
For example, Ford recently said it would close 14 of the older, "less efficient" plants but it was not clear in article I read, if this referred to production per man-hour or per unit of energy. I suspect it was the former, mainly, but that as cost of energy goes up, the more energy efficient plants will be the last in the US to shut down, so average efficiency in US will also be rising, but not nearly as rapidly as in China.
Obviously, it is the other side of the coin. Brazil et. al. will not just stuff all of the Yuan they get from selling raw materials and food stuff to China into mattresses (Although as US knows very well, that is the most profitable for China thing possible. - Then only cost to China is the printing of the currency - until as US is now discovering, the "mattresses money" can come out of the mattresses later and cause big problems. - inflation or high interest rates. (I think Bernickie/FED will prefer 10% interest to 10% inflationbut if oil goes to >$150 he will have both!) Brazilians et. al. will buy things from China with the Yuan they are earning. China can have a trade surpluss as they will be the main seller and there are many in the "third world" to play off against each other.quadraphonics said:
Almost all the world now prefers to buy from anyone other than America, if it is possible. China and India et. al. are rapidly gearing up to make it possible. As I said in prior post, in a few years no one will need (or want) America's high-cost labor's products. Only in agriculture will America be competitive. A few like my wife, refusing to drink even free coke cola at parties are extreme, but many share her views, in large part to GBW's policies and given a choice, may pay even slightly more for "not made in the USA," but generally "not made in the USA" will be cheaper also. America's fate is to become an agricultural colony of China.
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Billy T said:
I don't want to rehash my earlier posts on energy intensity, but here are some good links for those interested:
on China, energy and pollution:
http://www.eia.doe.gov/emeu/cabs/chinaenv.html
on US energy intensity:
http://intensityindicators.pnl.gov/highlights.html
on US energy production and consumption:
http://energy.cr.usgs.gov/energy/stats_ctry/Stat1.html
The overall picture is that America's overall energy efficiency is about a third that of China's. Furthermore, China's energy usage is skewed heavily towards industrial uses, as opposed to residential and transportation, while the industrial sector of the US economy is actually the MOST energy efficient sector. This means that the cost of production in China will get hit much harder than in America, while in America the cost of living will bear the brunt. However, it's a simple matter for Americans to buy smaller cars, ride the bus more often, or ride a bike. It is not a simple matter for China to replace all of its heavy industry. America has spent the last 15 years aggressively ditching energy-intense, low-value industry, largely by shifting it to China. This has left America lean and mean, and China with all of the inefficient industry that America didn't want anymore.
Also note that nuclear power is only expected to account for 4% of China's energy usage by 2025, while the US already gets almost 8% from nuclear. America also has the world's largest, most advanced nuclear fuel production infrastructure, so we should be covered on that front.
Billy T said:
Dude, this is how it works: every country tends to run a trade deficit with those countries that are poorer and less developed that it is (i.e., it imports raw materials from them) and a trade surplus with countries that are richer and more developed that it. This is true of China, the US, Brazil, and just about everyone else. China buys raw materials, textiles and semi-finished goods from poor countries, builds products out of them, and sells them to rich countries. America buys raw materials from poor countries and low-end products from China, produces high-end products and sells them to very rich countries (western europe, japan). Even if Brazil spends every penny of its export income on Chinese goods, that adds up to a trade *balance*, not a surplus for China. AND it would cause of inflation in China, so they wouldn't want them to do it anyway. Thus, it is extremely rare for a poor country to run a trade deficit with a rich country, and so a scheme for economic domination based on such a scenario would never work. To keep production up, China needs lots of demand. This can be cultivated internally (the best option in the long run), or supplied through exports (a good option during developmental phases). If China wants to keep its exports high, it has to be done through trade with countries with high consumption spending and lots of money. This means Japan, South Korea, the US and Western Europe. Demand from other countries can fill in the gaps a little, but that's about it. Annual American imports from China total more than the *entire* Brazilian GDP: even if Brazil spent every penny it earned on Chinese goods, it still couldn't replace America as a market for Chinese products.
To Quadraphonics:
You give excellent references because you are focused on the past. I can not because I am speculating on what will be, more than a decade hence. This is the fundamental difference between us. I seldom disagree with anything you state, (See exception at end.) but just think it somewhat irrelevant to my concern with the future. If ever there was a falsification (on the decade plus time scale) of “Past is prelude to Future,” China is it.
Your first reference concerns mainly air pollution. Yes, coal-powered China makes a lot. Return up one level in your reference to the more general discussion and you will find information more related to our discussion, which is the economic impact of Chinese growth / oil demand, etc over the next few decades. There you will find:
(1) China has been, and still is, EXPORTING some oil:
“…Recently, there has been substantial pressure to raise domestic prices in the context of high world oil prices. A series of increases in the state-mandated prices, however, has still not been sufficient to keep pace with the world market. This led, in the first half of 2005, to increases in exports of some petroleum products, particularly diesel, as the gap between domestic prices and world prices widened. The eventual goal is to eliminate subsidized prices, …”
(2)China is now producing 3.6 of the 6.5 (55%) Barrels/day of its oil requirements from a few of its older fields (all on land, near the coast). Most of western China has never been explored. It is the same earthquake-prone mountainous geology that exist in Iran, filled with millions of “slip faults” that trap oil. The pipeline expense to any port made this vast region of no interest to oil companies when oil was $20/barrel or less. Based on the size and geology, it would not be surprising to find that there is more oil there than in all of the middle East. Just now is China’s off shore oil potential being explored, with quite encouraging results. From YOUR reference’s more general next level up:
“…One field alone, Daqing in northeastern China, accounts for about 900,000 bbl/d of China's production, …At China's second-largest producing field, Liaohe in northeastern China, CNPC has contracted with several foreign firms for work to enhance oil recovery and extend the life of the field. In April 2004, Chinese authorities announced several new finds in the area of the existing Shengli field in the northeast, which is expected to extend oil production in the area. Government priorities focus on stabilizing production in the eastern regions of the country at current levels, increasing production in new fields in the west, … Offshore oil development also is a high priority:
Recent offshore oil exploration interest has centered on the Bohai Sea area, east of Tianjin, believed to hold more than 1.5 billion barrels in reserves, and the Pearl River Mouth area. ConocoPhillips announced in March 2000 that it had completed its appraisal drilling of the Peng Lai find in Block 11/05, and would proceed with development. …ConocoPhillips is planning a $1.8 billion investment to further develop its holdings in the Bohai Sea, over a period of several years, eventually raising production at Peng Lai to 140,000 bbl/d. CNOOC brought its Luda heavy oil field in the Bohai Sea into production in early 2005, and it is now producing around 40,000 bbl/d. In July 2001, CNOOC signed a production sharing contract with Canadian independent Husky Oil for Block 39-05 in the Pearl River Mouth, near the Wenchang 13-1/13-2 blocks, where Husky Oil and CNOOC currently are producing about 50,000 bbl/d. In October 2002, ChevronTexaco also concluded an agreement with CNOOC in for the development of the Bozhong field in the Bohai Sea, which has reserves estimated at 1.3 billion barrels, and is expected to begin production in the third quarter of 2005. In February 2005, Kerr-McGee signed a production sharing contract (PSC) for deepwater Block 43/11, southeast of Hong Kong. Kerr-McGee is funding 100 percent of the exploration costs, but CNOOC has farm-in rights for a 51 percent stake in the development phase, if oil is discovered. Meanwhile, improvement in Sino-Vietnamese relations has opened the way for oil and gas exploration in the Beibu Gulf (known in Vietnam as the Gulf of Tonkin) {insert by Billy T: Some believe this field was true reason why 50,000 Americans died there in a failed, pre-Iraq, attempt at "regime change" in North Vietnam. - I do not. IMHO, it was just the typical US combination of ignorance and arrogance. Western oil companies think the potential is great.} . In December 2000, China and Vietnam signed an agreement which settled their outstanding disputes over sovereignty and economic rights in offshore areas near their border.
With China's expectation of growing future dependence on oil imports, the country has been acquiring interests in exploration and production abroad. CNPC has acquired oil concessions in Azerbaijan, Canada, Kazakhstan, Venezuela, Sudan, Indonesia, Iraq, and Iran. The Greater Nile Petroleum Operating Company (GNPOC), the Sudanese oil project in which CNPC owns a stake, began exports in August 1999, and CNPC's equity oil from the project is around 150,000 bbl/d. Sinopec also has begun purchasing overseas oil assets, with its most notable success being a contract for the development of Iran's Yadavaran oil field signed in November 2004. Yadavaran may eventually produce 300,000 barrels per day. Sinopec also acquired a 40 percent stake in Canada's Northern Lights oil sands project in May 2005, which is expected to produce around 100,000 bbl/d by 2010. CNOOC also has purchased an upsteam equity stake in the small Malacca Strait oilfield in Indonesia, and made an unsuccessful offer to purchase Unocal in May 2005.…The most significant deal thus far is CNPC's acquisition of a 60 percent stake in the Kazakh oil firm Aktobemunaigaz, which came with a pledge to invest significantly in the company's future development over the next twenty years. The Kazakh and Chinese governments signed an agreement in May 2004 for the construction of a $700 million pipeline to export Kazakh crude oil into western China. The pipeline would run from Atasu in central Kazakhstan to Xinjiang, supplying three refineries with about 200,000 bbl/d of crude oil. The projected completion date for the pipeline is December 2005. Russia's Far East is seen as a potential source of Chinese crude oil imports. The Russian and Chinese governments have been holding regular discussions on the feasibility of pipelines to make such exports possible. One proposed plan is a pipeline which would carry as much as 1-million-bbl/d of crude oil from Anagarsk in Russia to join the existing Chinese pipeline network at Daqing. Yukos Oil of Russia and CNPC signed a memorandum of understanding in June 2003 for sales of oil via the pipeline, contingent on the pipeline being built. An alternative plan, proposed by Russian pipeline operator Transneft, would take Russian crude from both West Siberia and East Siberia via a 1 million bbl/d pipeline to an export terminal at the Pacific coast port of Nakhodka. Japan and China each have undertaken intense efforts to sway Russia toward their preferred pipeline option. As of mid-2005, it is unclear which option will prevail. Russian pipeline operator Transneft has stated that it will begin construction of the first phase of the pipeline, to Skovordino, less than 50 miles from the Chinese border, in late 2005. ….”
Note by Billy T:
Potentially the world’s largest oil reserves, (in western China) are not yet even being explored, but when oil is more than $100/Barrel they will be. The capitalistic international oil companies will do this, using the latest technology.- As Carl Marx wrote more than100 years ago: “A capitalist will sell you the rope to hang him with.”
A large percent of world’s 81 million B./day oil consumption is now going to US and only 2.9 B./day to China (most of that from Iran, only 17% from Saudi Arabia). Margins are very tight with production capacity at 83B./day and probably beginning to decline. (Only 1 Barrel new being discovered for each 4 now pumped.) If China needs to import any oil a decade hence, and I doubt it will*, it can and will buy the oil now going to US, especially from Venezuela, which supplies a major part of US , but probably not before Chaves completes the current program of distribution small weapons to the masses and training them in guerrilla war tactics, to discourage any US invasion/ regime change efforts there (all in the name of democracy of course.)
SUMMARY: By 2016, it is very possible that China will be self sufficient in oil, and still exporting it, earning even more foreign reserves than it ever did by trading with the US.
------------------------------------
*China is rapidly improving factory efficiency, will use public transport very much compared to US, and most of that will be electric trolleys, powered by their existing plus 30 new nuclear power station now in construction and/or hydroelectric dams, which include the world’s largest, soon to come on line, but a dozen smaller ones are also being built.
The US will be reducing oil consumption when oil is >$150/barrel, but that will be because the SUV and other gas hogs are up on blocks in suburban garages and the consumer-driven economy has collapsed. The “hair-cut / pizza-delivery” (local services only) US economy that survives “out-sourcing” will resemble China’s today in that its transportation mode will be, mainly, trucks, buses and bicycles.
As soon as I can, I will get to your next reference, but hope it is more relevant to a discussion of where China will be in a decade or two relative to US (See thread’s title) than the first was, but first I will respond to your last comment in the first part of your most recent reply where you said:
For good general, high-level, overview of "tails economics," See:
http://www.uxc.com/cover-stories/uxw_19-41-cover.html
For more detailed and analytic review see:
ENRICHMENT TAILS ASSAYS AND URANIUM SUPPLY: A DYNAMIC RELATIONSHIP by Thomas L. Neff Center for International Studies, MIT.
(Sorry I no longer have the web reference as I stupidly forgot to try to add it to the pdf file I down loaded to my computer, but search of above should yield it. It is nice, with graphs and well done. BTW, Brazil did not let the IAEC fully inspect last visit as Brazil's designers covered up the new, locally designed, centrfuges in the belief that they are are the world's best and Brazil has both uranium and plans to supply it enriched to power plant levels as cheap as Russia can once Russia stops blending in previously enriched weapons grade materials. I know a little about this as was considering investing in this area, but it is too complex to know well, so I did not. Probably a "U-bubble" is inflating now, IMHO. I sat the whole "dotcom" bubble out also - no doubt one can make a lot of money if lucky in your timing in and out of bubbles, but I do not play that game.)
where you will find,copying from my PC copy:
Russian SWU supply currently plays an important, but probably temporary, role in western enrichment activities, with European enrichers sending tails to Russia to be stripped and made into natural or enriched product.1 The primary benefit to European enrichers is probably not the value of the product received back but, rather, the avoidance of paying for tails disposition. {insert by BT: more complex than just enviroment. The utility buys the feed U and specifies the max percent of 235 to be left/lost in the tails, but the enricher often leaves more to save SWU, which rapidly increase as the tails % goes down. The utility company gets the U235% of the contract none the less as the enricher also buys and adds more raw U feed - resulting in more tails to get rid of to Russia etc at higher than contract U235%, etc. This is just the "tip of the iceberg" when it comes to trying to understand this game, which is maily kept secret as contracts are being violated, it may be weapons related, etc., etc.}
Production of one kilogram of EUP uses about 6 SWU but produces about 10 kg of tails (assuming 0.35% tails assay). If tails disposition costs $3/kg (a USEC estimate), the accrued disposition cost would be about $30/kg EUP, or about $5/SWU. Stripping these 10 kg of tails from 0.35% to only 0.31% would produce one kilogram of natural uranium. At $60 per Russian SWU, the cost to the western enricher would be about $23.40/kg natural uranium. The ultimate savings on tails disposition would be larger. The precise terms of these arrangements are not publicly known.
While western enrichers appear to have entered into tails upgrading deals with Russia to avoid tails disposition liabilities, and perhaps make small amounts of money on upgraded material, Russia appears to need clean western tails to make blend-stock for HEU. The latter appears to set the volume of tails upgrading deals Russia may be willing to enter into. Otherwise, both Tenex and Russian enrichment plant officials appear to regard tails upgrading as not very good business."
I.e. US abilitity to enrich uranium is of little interest to anyone, except the US militrary.
Some of China’s 30 new nuclear plants are of the “pebble bed” design, which is at least two, perhaps three, generations more modern than ANY in the US, all of which are designs at least 40 years old. It is the ability to produce power, not U235 enrichment, which is important for our discussion. Now for the other part of your above claim:
In the first part above, you are stating that US nuclear power is now supplying twice the percentage of current US energy use, which is much larger (five times, at least, I think, and will assume for now.) than China’s. Your are also stating that China will be supplying only 4% in 2025 of its total energy needs with nuclear energy! (France currently supplies 80+% of its electric needs and exports electric power to Germany, but I admit that is not directly relevant.)
That is your are stating that the US gets NOW, from it old nuclear plants at least 10 times more (2x5) than China will get in 2025 after adding at least the 30 new nuclear plants now being constructed (and probably after 60 more have been added, if the present rate of 30/decade continues.) to its existing nuclear energy facilities.*
Only an enormous increase in China’s use of non nuclear power in addition to it rapidly increasing use of nuclear electric power, could make your statement true / possible. (I.e. Keep non nuclear energy at 96% of the total.) If China does grow its energy use that much, then surely the answer to the thread’s question is:
“Yes China will pass the US well before 2025!”
Are you admitting this is the answer?
It seems so, if you are making a true statement in first part of text quoted above.
Also note that if that much energy is being used in China, despite its policy of closing coal mines (3000 closed last year), the price of oil will surely exceed $1000/barrel (and not even a “pizza delivery economy” will survive in the US!)
----------------------------------------------
* I am tempted to say: “get real” but out of respect for you, I will not.
You give excellent references because you are focused on the past. I can not because I am speculating on what will be, more than a decade hence. This is the fundamental difference between us. I seldom disagree with anything you state, (See exception at end.) but just think it somewhat irrelevant to my concern with the future. If ever there was a falsification (on the decade plus time scale) of “Past is prelude to Future,” China is it.
Your first reference concerns mainly air pollution. Yes, coal-powered China makes a lot. Return up one level in your reference to the more general discussion and you will find information more related to our discussion, which is the economic impact of Chinese growth / oil demand, etc over the next few decades. There you will find:
(1) China has been, and still is, EXPORTING some oil:
“…Recently, there has been substantial pressure to raise domestic prices in the context of high world oil prices. A series of increases in the state-mandated prices, however, has still not been sufficient to keep pace with the world market. This led, in the first half of 2005, to increases in exports of some petroleum products, particularly diesel, as the gap between domestic prices and world prices widened. The eventual goal is to eliminate subsidized prices, …”
(2)China is now producing 3.6 of the 6.5 (55%) Barrels/day of its oil requirements from a few of its older fields (all on land, near the coast). Most of western China has never been explored. It is the same earthquake-prone mountainous geology that exist in Iran, filled with millions of “slip faults” that trap oil. The pipeline expense to any port made this vast region of no interest to oil companies when oil was $20/barrel or less. Based on the size and geology, it would not be surprising to find that there is more oil there than in all of the middle East. Just now is China’s off shore oil potential being explored, with quite encouraging results. From YOUR reference’s more general next level up:
“…One field alone, Daqing in northeastern China, accounts for about 900,000 bbl/d of China's production, …At China's second-largest producing field, Liaohe in northeastern China, CNPC has contracted with several foreign firms for work to enhance oil recovery and extend the life of the field. In April 2004, Chinese authorities announced several new finds in the area of the existing Shengli field in the northeast, which is expected to extend oil production in the area. Government priorities focus on stabilizing production in the eastern regions of the country at current levels, increasing production in new fields in the west, … Offshore oil development also is a high priority:
Recent offshore oil exploration interest has centered on the Bohai Sea area, east of Tianjin, believed to hold more than 1.5 billion barrels in reserves, and the Pearl River Mouth area. ConocoPhillips announced in March 2000 that it had completed its appraisal drilling of the Peng Lai find in Block 11/05, and would proceed with development. …ConocoPhillips is planning a $1.8 billion investment to further develop its holdings in the Bohai Sea, over a period of several years, eventually raising production at Peng Lai to 140,000 bbl/d. CNOOC brought its Luda heavy oil field in the Bohai Sea into production in early 2005, and it is now producing around 40,000 bbl/d. In July 2001, CNOOC signed a production sharing contract with Canadian independent Husky Oil for Block 39-05 in the Pearl River Mouth, near the Wenchang 13-1/13-2 blocks, where Husky Oil and CNOOC currently are producing about 50,000 bbl/d. In October 2002, ChevronTexaco also concluded an agreement with CNOOC in for the development of the Bozhong field in the Bohai Sea, which has reserves estimated at 1.3 billion barrels, and is expected to begin production in the third quarter of 2005. In February 2005, Kerr-McGee signed a production sharing contract (PSC) for deepwater Block 43/11, southeast of Hong Kong. Kerr-McGee is funding 100 percent of the exploration costs, but CNOOC has farm-in rights for a 51 percent stake in the development phase, if oil is discovered. Meanwhile, improvement in Sino-Vietnamese relations has opened the way for oil and gas exploration in the Beibu Gulf (known in Vietnam as the Gulf of Tonkin) {insert by Billy T: Some believe this field was true reason why 50,000 Americans died there in a failed, pre-Iraq, attempt at "regime change" in North Vietnam. - I do not. IMHO, it was just the typical US combination of ignorance and arrogance. Western oil companies think the potential is great.} . In December 2000, China and Vietnam signed an agreement which settled their outstanding disputes over sovereignty and economic rights in offshore areas near their border.
With China's expectation of growing future dependence on oil imports, the country has been acquiring interests in exploration and production abroad. CNPC has acquired oil concessions in Azerbaijan, Canada, Kazakhstan, Venezuela, Sudan, Indonesia, Iraq, and Iran. The Greater Nile Petroleum Operating Company (GNPOC), the Sudanese oil project in which CNPC owns a stake, began exports in August 1999, and CNPC's equity oil from the project is around 150,000 bbl/d. Sinopec also has begun purchasing overseas oil assets, with its most notable success being a contract for the development of Iran's Yadavaran oil field signed in November 2004. Yadavaran may eventually produce 300,000 barrels per day. Sinopec also acquired a 40 percent stake in Canada's Northern Lights oil sands project in May 2005, which is expected to produce around 100,000 bbl/d by 2010. CNOOC also has purchased an upsteam equity stake in the small Malacca Strait oilfield in Indonesia, and made an unsuccessful offer to purchase Unocal in May 2005.…The most significant deal thus far is CNPC's acquisition of a 60 percent stake in the Kazakh oil firm Aktobemunaigaz, which came with a pledge to invest significantly in the company's future development over the next twenty years. The Kazakh and Chinese governments signed an agreement in May 2004 for the construction of a $700 million pipeline to export Kazakh crude oil into western China. The pipeline would run from Atasu in central Kazakhstan to Xinjiang, supplying three refineries with about 200,000 bbl/d of crude oil. The projected completion date for the pipeline is December 2005. Russia's Far East is seen as a potential source of Chinese crude oil imports. The Russian and Chinese governments have been holding regular discussions on the feasibility of pipelines to make such exports possible. One proposed plan is a pipeline which would carry as much as 1-million-bbl/d of crude oil from Anagarsk in Russia to join the existing Chinese pipeline network at Daqing. Yukos Oil of Russia and CNPC signed a memorandum of understanding in June 2003 for sales of oil via the pipeline, contingent on the pipeline being built. An alternative plan, proposed by Russian pipeline operator Transneft, would take Russian crude from both West Siberia and East Siberia via a 1 million bbl/d pipeline to an export terminal at the Pacific coast port of Nakhodka. Japan and China each have undertaken intense efforts to sway Russia toward their preferred pipeline option. As of mid-2005, it is unclear which option will prevail. Russian pipeline operator Transneft has stated that it will begin construction of the first phase of the pipeline, to Skovordino, less than 50 miles from the Chinese border, in late 2005. ….”
Note by Billy T:
Potentially the world’s largest oil reserves, (in western China) are not yet even being explored, but when oil is more than $100/Barrel they will be. The capitalistic international oil companies will do this, using the latest technology.- As Carl Marx wrote more than100 years ago: “A capitalist will sell you the rope to hang him with.”
A large percent of world’s 81 million B./day oil consumption is now going to US and only 2.9 B./day to China (most of that from Iran, only 17% from Saudi Arabia). Margins are very tight with production capacity at 83B./day and probably beginning to decline. (Only 1 Barrel new being discovered for each 4 now pumped.) If China needs to import any oil a decade hence, and I doubt it will*, it can and will buy the oil now going to US, especially from Venezuela, which supplies a major part of US , but probably not before Chaves completes the current program of distribution small weapons to the masses and training them in guerrilla war tactics, to discourage any US invasion/ regime change efforts there (all in the name of democracy of course.)
SUMMARY: By 2016, it is very possible that China will be self sufficient in oil, and still exporting it, earning even more foreign reserves than it ever did by trading with the US.
------------------------------------
*China is rapidly improving factory efficiency, will use public transport very much compared to US, and most of that will be electric trolleys, powered by their existing plus 30 new nuclear power station now in construction and/or hydroelectric dams, which include the world’s largest, soon to come on line, but a dozen smaller ones are also being built.
The US will be reducing oil consumption when oil is >$150/barrel, but that will be because the SUV and other gas hogs are up on blocks in suburban garages and the consumer-driven economy has collapsed. The “hair-cut / pizza-delivery” (local services only) US economy that survives “out-sourcing” will resemble China’s today in that its transportation mode will be, mainly, trucks, buses and bicycles.
As soon as I can, I will get to your next reference, but hope it is more relevant to a discussion of where China will be in a decade or two relative to US (See thread’s title) than the first was, but first I will respond to your last comment in the first part of your most recent reply where you said:
I find some of that very hard to believe, and the last sentence applies only to the production of "separation work units", but there is such a great supply of them in Russia at much lower cost, that no one is interested in that US capacity. Much of the old "tailings" contain, by modern standards, relatively high levels of U235 and are now being shipped to Russia both for the recovery of U235, but also just to get rid of the stuff and avoid enviromental dammage fines. See:Quadraphonics said:
For good general, high-level, overview of "tails economics," See:
http://www.uxc.com/cover-stories/uxw_19-41-cover.html
For more detailed and analytic review see:
ENRICHMENT TAILS ASSAYS AND URANIUM SUPPLY: A DYNAMIC RELATIONSHIP by Thomas L. Neff Center for International Studies, MIT.
(Sorry I no longer have the web reference as I stupidly forgot to try to add it to the pdf file I down loaded to my computer, but search of above should yield it. It is nice, with graphs and well done. BTW, Brazil did not let the IAEC fully inspect last visit as Brazil's designers covered up the new, locally designed, centrfuges in the belief that they are are the world's best and Brazil has both uranium and plans to supply it enriched to power plant levels as cheap as Russia can once Russia stops blending in previously enriched weapons grade materials. I know a little about this as was considering investing in this area, but it is too complex to know well, so I did not. Probably a "U-bubble" is inflating now, IMHO. I sat the whole "dotcom" bubble out also - no doubt one can make a lot of money if lucky in your timing in and out of bubbles, but I do not play that game.)
where you will find,copying from my PC copy:
Russian SWU supply currently plays an important, but probably temporary, role in western enrichment activities, with European enrichers sending tails to Russia to be stripped and made into natural or enriched product.1 The primary benefit to European enrichers is probably not the value of the product received back but, rather, the avoidance of paying for tails disposition. {insert by BT: more complex than just enviroment. The utility buys the feed U and specifies the max percent of 235 to be left/lost in the tails, but the enricher often leaves more to save SWU, which rapidly increase as the tails % goes down. The utility company gets the U235% of the contract none the less as the enricher also buys and adds more raw U feed - resulting in more tails to get rid of to Russia etc at higher than contract U235%, etc. This is just the "tip of the iceberg" when it comes to trying to understand this game, which is maily kept secret as contracts are being violated, it may be weapons related, etc., etc.}
Production of one kilogram of EUP uses about 6 SWU but produces about 10 kg of tails (assuming 0.35% tails assay). If tails disposition costs $3/kg (a USEC estimate), the accrued disposition cost would be about $30/kg EUP, or about $5/SWU. Stripping these 10 kg of tails from 0.35% to only 0.31% would produce one kilogram of natural uranium. At $60 per Russian SWU, the cost to the western enricher would be about $23.40/kg natural uranium. The ultimate savings on tails disposition would be larger. The precise terms of these arrangements are not publicly known.
While western enrichers appear to have entered into tails upgrading deals with Russia to avoid tails disposition liabilities, and perhaps make small amounts of money on upgraded material, Russia appears to need clean western tails to make blend-stock for HEU. The latter appears to set the volume of tails upgrading deals Russia may be willing to enter into. Otherwise, both Tenex and Russian enrichment plant officials appear to regard tails upgrading as not very good business."
I.e. US abilitity to enrich uranium is of little interest to anyone, except the US militrary.
Some of China’s 30 new nuclear plants are of the “pebble bed” design, which is at least two, perhaps three, generations more modern than ANY in the US, all of which are designs at least 40 years old. It is the ability to produce power, not U235 enrichment, which is important for our discussion. Now for the other part of your above claim:
In the first part above, you are stating that US nuclear power is now supplying twice the percentage of current US energy use, which is much larger (five times, at least, I think, and will assume for now.) than China’s. Your are also stating that China will be supplying only 4% in 2025 of its total energy needs with nuclear energy! (France currently supplies 80+% of its electric needs and exports electric power to Germany, but I admit that is not directly relevant.)
That is your are stating that the US gets NOW, from it old nuclear plants at least 10 times more (2x5) than China will get in 2025 after adding at least the 30 new nuclear plants now being constructed (and probably after 60 more have been added, if the present rate of 30/decade continues.) to its existing nuclear energy facilities.*
Only an enormous increase in China’s use of non nuclear power in addition to it rapidly increasing use of nuclear electric power, could make your statement true / possible. (I.e. Keep non nuclear energy at 96% of the total.) If China does grow its energy use that much, then surely the answer to the thread’s question is:
“Yes China will pass the US well before 2025!”
Are you admitting this is the answer?
It seems so, if you are making a true statement in first part of text quoted above.
Also note that if that much energy is being used in China, despite its policy of closing coal mines (3000 closed last year), the price of oil will surely exceed $1000/barrel (and not even a “pizza delivery economy” will survive in the US!)
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* I am tempted to say: “get real” but out of respect for you, I will not.
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This old thread's subject is still hot. Here from Business Week are 10 interesting photos of how China has already passed the US in one area:
http://images.businessweek.com/ss/05/12/china_wonders/index_01.htm
The text associated with photo number seven is:
"Linked Hybrid, which will house 2,500 people in 700 apartments covering 1.6 million square feet, is a model for large-scale sustainable residential architecture. The site will feature one of the world's largest geothermal cooling and heating systems, which will stabilize the temperature within the complex of eight buildings, all linked at the 20th floor by a "ring" of service establishments, like cafés and dry cleaners. A set of dual pipes pumps water from 100 meters below ground, circulating the liquid between the buildings' concrete floors."
This was especially interesting to me for two reasons:
(1) Note the contrast to the "suburban infrastructure" the US has developed that is totally unsuited to the era of expensive energy, as I have been pointing out in several posts as one of the major factors why China going up will pass the US rapidly going down, much sooner than many expect.
(2) Many years ago I "invented" CASES, Community Annual Storage Energy System, which used aquifers to store "winter's cold" for summer's air conditioning needs and also used the little know fact that most cities, even in the coldest parts of US in winter are exhausting internally generated heat from major buildings (typically by exchanging warm internal air for outside cold air, that they may even artificially heat with fossil fuel). This discarded heat is more than adequate in many cases to supply the entire heating requirements of smaller building (residences, mainly) via a warm water (not steam) district heating system. This warm water is the heat source for more compact, and economical heat pumps and much more efficient than the typical air source heat pumps that pull heat from a much colder source (the winter air).
Using hourly weather records in a detailed computer model simulating the community (sponsored by DOE and US Navy* for several years) the economic energy savings over the system’s life time were very clear and significant. In US society, the up-front capital cost and the "rugged individualist" attitude against anything that resembles a socialistic or community system made the great energy and economic savings impossible to implement. There are now a few such systems in Sweden and Canada. I guess I can now add China to this list of intelligent community heating/ cooling systems. Ironically, the greater the heating requirements, the more economically rewarding CASES** is.
Without actually know the facts, but based on several years of analytical work on CASES, I would guess that the Chinese complex shown in photo seven uses less than 1/3 of the space conditioning energy as the same number of people housed in typical US "suburban infrastructure" structures (and this dose not consider the energy cost of residents going to / from work). Usually when this last point is made, someone always mentions "telecommuting to work,” but the cost of providing high band width to the residents of Chinese building seven, is probably less than 10% of providing it to this same population living in US "suburban infrastructure." Thus, "telecommuting to work” can help, but US style is much more costly than it need be. (Also the potatoes from Idaho, Florida oranges, and California grapes, etc do not go thru the internet and very little food is locally produced in the US.)
To repeat myself: The US will pay dearly for the "suburban infrastructure" it has foolishly constructed. (Ford paid dearly today for being part of it - Ford’s shares dropped 10% in one day and few think Ford will survive more than a year or two more. 16 more plants to close, etc.)
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*A special case study of the CINC command building complex at Norfolk VA which generates huge excess heat in winter, keeping computers happy and lights on 24/7 serving as heat for water source heat pumps in relatively near by residential complexes.
**For regions where no suitable aquifer exists, or injection into it is illegal, a version of CASES with giant, high-COP ice-making machines in winter supplying at least*** 80 calories per gram of ice made plus all the electric input required to run the ice machines to communities with net heat requirements (really a central, water-source, heat pump system as ice machines are heat pumps and much more efficient that air-source heat pumps.) and large cooling requirements in summer are economically viable and efficient also, but then slightly more southern locations are best. (The ice is of course stored for the summer cooling requirements effectively doubling the COP of these heat pumps.)
***100 cal/gram if 20degree C water is available from cooling big buildings and/or aquifer, warmed the prior summer.
http://images.businessweek.com/ss/05/12/china_wonders/index_01.htm
The text associated with photo number seven is:
"Linked Hybrid, which will house 2,500 people in 700 apartments covering 1.6 million square feet, is a model for large-scale sustainable residential architecture. The site will feature one of the world's largest geothermal cooling and heating systems, which will stabilize the temperature within the complex of eight buildings, all linked at the 20th floor by a "ring" of service establishments, like cafés and dry cleaners. A set of dual pipes pumps water from 100 meters below ground, circulating the liquid between the buildings' concrete floors."
This was especially interesting to me for two reasons:
(1) Note the contrast to the "suburban infrastructure" the US has developed that is totally unsuited to the era of expensive energy, as I have been pointing out in several posts as one of the major factors why China going up will pass the US rapidly going down, much sooner than many expect.
(2) Many years ago I "invented" CASES, Community Annual Storage Energy System, which used aquifers to store "winter's cold" for summer's air conditioning needs and also used the little know fact that most cities, even in the coldest parts of US in winter are exhausting internally generated heat from major buildings (typically by exchanging warm internal air for outside cold air, that they may even artificially heat with fossil fuel). This discarded heat is more than adequate in many cases to supply the entire heating requirements of smaller building (residences, mainly) via a warm water (not steam) district heating system. This warm water is the heat source for more compact, and economical heat pumps and much more efficient than the typical air source heat pumps that pull heat from a much colder source (the winter air).
Using hourly weather records in a detailed computer model simulating the community (sponsored by DOE and US Navy* for several years) the economic energy savings over the system’s life time were very clear and significant. In US society, the up-front capital cost and the "rugged individualist" attitude against anything that resembles a socialistic or community system made the great energy and economic savings impossible to implement. There are now a few such systems in Sweden and Canada. I guess I can now add China to this list of intelligent community heating/ cooling systems. Ironically, the greater the heating requirements, the more economically rewarding CASES** is.
Without actually know the facts, but based on several years of analytical work on CASES, I would guess that the Chinese complex shown in photo seven uses less than 1/3 of the space conditioning energy as the same number of people housed in typical US "suburban infrastructure" structures (and this dose not consider the energy cost of residents going to / from work). Usually when this last point is made, someone always mentions "telecommuting to work,” but the cost of providing high band width to the residents of Chinese building seven, is probably less than 10% of providing it to this same population living in US "suburban infrastructure." Thus, "telecommuting to work” can help, but US style is much more costly than it need be. (Also the potatoes from Idaho, Florida oranges, and California grapes, etc do not go thru the internet and very little food is locally produced in the US.)
To repeat myself: The US will pay dearly for the "suburban infrastructure" it has foolishly constructed. (Ford paid dearly today for being part of it - Ford’s shares dropped 10% in one day and few think Ford will survive more than a year or two more. 16 more plants to close, etc.)
--------------------------------
*A special case study of the CINC command building complex at Norfolk VA which generates huge excess heat in winter, keeping computers happy and lights on 24/7 serving as heat for water source heat pumps in relatively near by residential complexes.
**For regions where no suitable aquifer exists, or injection into it is illegal, a version of CASES with giant, high-COP ice-making machines in winter supplying at least*** 80 calories per gram of ice made plus all the electric input required to run the ice machines to communities with net heat requirements (really a central, water-source, heat pump system as ice machines are heat pumps and much more efficient that air-source heat pumps.) and large cooling requirements in summer are economically viable and efficient also, but then slightly more southern locations are best. (The ice is of course stored for the summer cooling requirements effectively doubling the COP of these heat pumps.)
***100 cal/gram if 20degree C water is available from cooling big buildings and/or aquifer, warmed the prior summer.
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108!! Sheesh.
Yes! Sheesh in deed! BTW in 2002 the Brazilain airplane maker {Embraer} built factory in Harbin China (with Chinese partner) and last week announced one chinese company (a hotel chain basically as I recall) oredered 100 planes (50 of the 90 seaters to be built in the Harbin plant and 50 of the 106 seat planes in Brazil).Nickelodeon said:
The "Chuppies" of China are getting so rich, so quick, that the tourism/hotel/vacation business is expanding at fantastic clip. I do not know, but guess this hotel company will be flying their guests arround to various cities where they have hotels, using many of these 100 planes and 108 new airports.
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Saint said:
Agree.
Billy - We built our suburbad infrastructure in a few short boom years after WWII. If we ever "HAVE" to move to something else, we will. It isn't like we are locked into any system.
And China, with its population, has much greater need for these developments than we do. Even with a head-start, they aren't going to control these needs as readily as we could. Market forces, and the invisible hand of Adam Smith, will generate whatever is required.