NationStates Jolt Archive

This guy just lays it out as simple as can be. This is why people who expect Chinese growth into a major industrial superpower are probably going to be surprised over the next ten to twenty years as that trend is reversed. The numbers simply aren't there. The resources necessary to turn 1.5 billion Chinese into American/European style consumers simply don't exist. I've included a commentary from the website I pulled the article from, though it was originally published on Yahoo News. (http://news.yahoo.com/s/afp/20060530/sc_afp/chinaenvironment_060530175508)



China growth unsustainable on all counts, must change: economist

China's growth model, based on the West's economic model with its massive appetite for resources and increasing environmental degradation is unsustainable and will have to change, a leading environmentalist said.

Lester Brown, head of the Washington-based Earth Policy Institute, told reporters in Beijing that China's current path could not be maintained at either the national or international level.

"The Western economic model -- the fossil fuel based, automobile-centered, throwaway economy -- will not work for China," Brown said.

"If it doesn't work for China, it will not work for India or the three billion other people in developing countries who are also dreaming the American dream."

Brown, in Beijing to promote the Chinese edition of his new book, "Plan B 2.0, Rescuing a Planet Under Stress," said China had overtaken the United States as the leading consumer of most basic commodities and would soon face major shortages.

"Among the five basic food, energy and industrial commodities -- grain and meat, oil and coal and steel -- consumption in China has eclipsed that of the United States in all but oil," he said.

If China's economy continues to grow by 8.0 percent annually, per capita income will equal that of current levels in the United States by the year 2030, when the nation will boast a population of 1.45 billion people, Brown said.

China grew 9.9 percent last year and 10.3 percent in the first quarter of 2006 and looks set to expand at similar rates going forward.

On the same model, Brown said China's annual grain consumption would equal two-thirds of current world grain output and annual paper consumption would be double current world production by 2030.

"There go the world's forests," he said.

On oil, Brown pointed to a similar scenario of simply not having enough to meet China's demands.

"If oil consumption per person reaches the US level by 2031, China will use 99 million barrels a day.

"The world is currently producing 84 million barrels a day and may never produce much more."

If three out of every four people in China own cars, as in the United States, there will be 1.1 billion vehicles on Chinese roads, compared to the current world fleet of 800 million, Brown said.

At a time of globalization and intense competition to produce more at ever lower prices, the contemporary economic model is doomed, Brown said.

"Environmental scientists have been saying for some time that the global economy is being slowly undermined by environmental trends of human origin," Brown said.

Coupled with climate change, Brown said that "we may be approaching the point of no return."

To avert disaster, the world must embrace renewable energy, move to eradicate poverty, stabilize populations and restore natural systems, he said.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

It's a tragedy for the Chinese people that their country is rapidly industrialising, destroying much sustainable infrastructure and leaving so much pollution behind in the process — now, at the beginning of the end of the oil age, when perhaps as a globe we should be reversing the trend of industrialisation.

However, any criticism from an ecological perspective by people in Western nations must also include leading by example.

-AF

http://www.energybulletin.net/16626.html

Well, the Chinese economic growth is unsustainable for several reasons, and the PRC is due for a nasty economic rough patch sometime in the next decade.

Well, the Chinese economic growth is unsustainable for several reasons, and the PRC is due for a nasty economic rough patch sometime in the next decade.
Sure, but the sheer numbers speak loudly, no?

On the same model, Brown said China's annual grain consumption would equal two-thirds of current world grain output and annual paper consumption would be double current world production by 2030.

"There go the world's forests," he said.

On oil, Brown pointed to a similar scenario of simply not having enough to meet China's demands.

"If oil consumption per person reaches the US level by 2031, China will use 99 million barrels a day.

"The world is currently producing 84 million barrels a day and may never produce much more."

If three out of every four people in China own cars, as in the United States, there will be 1.1 billion vehicles on Chinese roads, compared to the current world fleet of 800 million, Brown said.

I'd have to agree with this 100%; China's growth is not only occuring too fast but it is overleveraged towards manufacturing and energy-intensive industries with none of the efficiency technology or investments common in other industrial nations. Environmentally, they are simply ruining their nation through waste and placement of growth over environmental sustainability with the result being severe pollution and huge amounts of wasted resources.

To their credit, they have made major investments in renewable energy and curtailing some growth but these policies are being rendered irrelevant by their subsidies on fuels and other products; Chinese refiners are not profitable at all despite record high prices for refined products due to price controls. Also, since the government is intent on keeping unrest under control it can't control consumption of the most wasted product, diesel fuel, due to the huge amount of discontent among farmers who use the most of it. The Chinese are also buying very heavily in to automobiles and are driving up gasoline consumption at incredible rates due to controlled prices

This has a lot to do with why I feel India will surpass China; their growth is much more centered on high productivity, high tech industry with comparatively low resource intensity; even though India's heavy manufacturing sector has soared along with China's, it's using a good deal less energy per unit of output than it was in 2000. Also, compared to China they are not encouraging an automobile based economy; they do not subsidize oil products but actually tax them. India also makes big investments in alternative fuels and energy similar to those used by China but unlike China they also provide credits and loans for distributed-generation projects and
efficiency upgrades. However, they still have price controls on the products; due to the fact that such controls are heavily leveraged towards the poor and are not a huge chunk of petroleum products this is not significantly driving overall demand. Since poverty in India is being combatted vigorously, it is very possible that such controls will not be needed in a fairly short time. India's government has also plainly stated its opposition to a car based culture, and the innovative design of its high-tech centers helps confirm their decision to develop a post-fossil economic model.

India and China are in some ways fortunate to be developing in a near-Peak world; they have the opportunity to develop without a petroleum-based economy and if they pursue it they will be a model for economic development in other places in a world of scarce, expensive oil. It is virtually impossible that oil production will ever rise high enough to meet the demand of another billion cars and trucks, and even if it does the price will still be extremely high.
The main threat of Peak Oil is primarily towards the automobile based culture of the United States and other developed nations; while the automobile will not die out due to its inherent advantages, the economy centered around it will and that is why China and possibly other places will be rendered economically hurt or even devastated by the Peak.

I think nations that focus on technology will emerge as the winners post-Peak, and those that don't will be the losers. Internet commerce and technology will be huge due to their ability to eliminate a lot of the need for oil in the purchase of goods and services; places like Wal-Mart will likely suffer or go bankrupt unless they eliminate the need for cars to access their stores. Even the Middle East may in fact have a massive opportunity to emerge economically as a developed region from the aftermath of Peak Oil due to the weakening of the petrocrat dictatorships and the loss of strategic interest that will highlight the region's other assets.

Summed up: Technology-based (including biotech/nano) and superefficient manufacturing based economies and India will emerge as the post-Peak leaders while China and places heavily dependent on oil products will fall behind and suffer severe economic hardship until the transition is forced. If they switch over early enough, things will go smoother but remaining dependent on or encouraging dependence on the gasoline-powered automobiel as the backbone of the economy is bad policy and will lead to serious economic consequences. The truly worst situation would be Depression level unemployment and negative GDP growth but 1979-style inflation, but that is a possibility in a world of oil spikes...it's the worst of both worlds, recession and inflation.

Sure, but the sheer numbers speak loudly, no?

Even if growth were to remain steady at around 1.5% over the next 25 years, we're still using 121.88 million bpd by 2031. If China were to become as heavy a consumer as the US, we'd be looking at over 127.15 million bpd between the US and China alone, to say nothing of the other 4.4 billion consumers in the rest of the world.

I fully doubt that we can reach even 122 million bpd, let alone the likely 180-200 million required if China's consumption reaches US levels. I personally think at most 100 million will be the tipping point, if not lower...we still have a moderate way to go before a peak, but not enough to accomodate the kind of demand that will emerge if demand follows projections.

Funny how the article title mentions economist, but the article itself does not quote one anywhere, it seems.

This is environmentalism being pushed off as economics. These are, in essence, two separate things. Perhaps Mr. Brown also has some training in economics, but his quotes are not based on questions of economics - they are based on questions of environmentalism and Malthusian principles.

I'm not judging the article's conclusions, but the fact that the article misrepresents itself, is based on only one source, and that source is promoting a book on said subject definitely makes me question its motives.

Funny how the article title mentions economist, but the article itself does not quote one anywhere, it seems.

This is environmentalism being pushed off as economics. These are, in essence, two separate things. Perhaps Mr. Brown also has some training in economics, but his quotes are not based on questions of economics - they are based on questions of environmentalism and Malthusian principles.

I'm not judging the article's conclusions, but the fact that the article misrepresents itself, is based on only one source, and that source is promoting a book on said subject definitely makes me question its motives.
That's an irrelevent criticism. The title itself says it's conclusions are based on one person's opinions. That being said, I reiterate:

On the same model, Brown said China's annual grain consumption would equal two-thirds of current world grain output and annual paper consumption would be double current world production by 2030.

"There go the world's forests," he said.

On oil, Brown pointed to a similar scenario of simply not having enough to meet China's demands.

"If oil consumption per person reaches the US level by 2031, China will use 99 million barrels a day.

"The world is currently producing 84 million barrels a day and may never produce much more."

If three out of every four people in China own cars, as in the United States, there will be 1.1 billion vehicles on Chinese roads, compared to the current world fleet of 800 million, Brown said. Those numbers are the real reason I posted the article. All of these quotes are posted as "if/then" statements so they are not conclusions, but they point out that when you realy start to consider the sheer numbers on the resources they'll need to move from the "developing" side of the world chart to the "developed" side they simply don't add up.

The Chinese growth may be unsustainable, but so is our western lifestyle. If the Chinese can't attain it, they'll drag us down first.
Well, oil would run out sooner or later anyway, it'll just be sooner thanks to the booming chinese economy.

That's an irrelevent criticism. The title itself says it's conclusions are based on one person's opinions.


I disagree. The title is "China growth unsustainable on all counts, must change: economist". There is no truly economic discussion in the article concerning the issues raised. Hence, I stand by my previous post. I'm criticising the article and the way it is mispresented rather than any of the actual content. My criticism is that the information is being offered as something it is not.


Those numbers are the real reason I posted the article. All of these quotes are posted as "if/then" statements so they are not conclusions, but they point out that when you realy start to consider the sheer numbers on the resources they'll need to move from the "developing" side of the world chart to the "developed" side they simply don't add up.


This may be a valid analysis. However, it is not economic in nature because there is no discussion on the role of supply and demand in prices, and the effect of those prices in the allocation of resources. There is an implicit assumption that demand will increase, regardless of supply and the resulting prices of said resources. These factors change the dynamic considerably. Again, I'm not disputing the numbers, I'm disputing the article you initially posted being an economic analysis. It is Malthusian worry, however valid that may or may not be. I'm not arguing that the Chinese will have a smooth and wonderful transition to developed consumer-driven economy.

This may be a valid analysis. However, it is not economic in nature because there is no discussion on the role of supply and demand in prices, and the effect of those prices in the allocation of resources. There is an implicit assumption that demand will increase, regardless of supply and the resulting prices of said resources.

Well, the main problem with that criticism is the simple fact that China does not have a functioning supply-demand model like that in other parts of the world economy. Most of its basic factors of production are either price-controlled, subsidized, or provided by the government without supply or demand being a factor.

Until China begins to lift price caps and expand the role of market forces, the economy will not gain the flexibility of demand that is prevalent in less regulated economies with the result that demand will increase almost 100% independently of price. However, China is in a bind because they cannot raise prices without incurring civil unrest, and the only way they can get out of such a bind is to either liberalize their government or try to weather a firestorm of civil unrest from poor farmers.

Simply put, there is no truly or even partially efficient market in China; this model is unsustainable because only market forces can resolve the problem of scarcity.

I never really had any doubts about this occuring. But I believe China will make the best attempt to continue their current actions until it becomes glaringly obvious that they just can't handle it. By that time, I believe China will no longer be in their current state of pseudo-communism/capitalism. The two systems cannot work together and hope to benefit the end user: in this case, the Chinese people. Capitalism will win its way through and China will need all the help they can get to try and stabilize their situation.

The Chinese need to find their niche in the world economy and run with it. They must try and produce goods within their own borders to try and limit exports, and then maximize exports. It's a Smith/Mercantilist economy.

I never really had any doubts about this occuring. But I believe China will make the best attempt to continue their current actions until it becomes glaringly obvious that they just can't handle it. By that time, I believe China will no longer be in their current state of pseudo-communism/capitalism. The two systems cannot work together and hope to benefit the end user: in this case, the Chinese people. Capitalism will win its way through and China will need all the help they can get to try and stabilize their situation.

The Chinese need to find their niche in the world economy and run with it. They must try and produce goods within their own borders to try and limit exports, and then maximize exports. It's a Smith/Mercantilist economy.
the thing that comes glaring out at me is that they need to address the fact that by 2030 they will have 1.5 BILLION PEOPLE LIVING IN THEIR COUNTRY!!!!!!!

This is very depressing. They had a population comtrol program in place that would have been seeing population declines by now had they not dramatically curtailed the program for purely racist principles, that being they wanted a certain number of humans living on teh planet to be Chinese.

the thing that comes glaring out at me is that they need to address the fact that by 2030 they will have 1.5 BILLION PEOPLE LIVING IN THEIR COUNTRY!!!!!!!

This is very depressing. They had a population comtrol program in place that would have been seeing population declines by now had they not dramatically curtailed the program for purely racist principles, that being they wanted a certain number of humans living on teh planet to be Chinese.

The 'One-Child Law' never would have met success. It would have merely slowed the exponential grow of their population. And it increased the amount of child deaths (usually female) and orphanage populations. What's sad is the fact that the rest of the world must make up for the Chinese slack and adopt the abandoned babies.

If China is lucky, there will be a nuclear holocaust which will lower the global population to a reasonable level of radiation-mutated freaks.

the thing that comes glaring out at me is that they need to address the fact that by 2030 they will have 1.5 BILLION PEOPLE LIVING IN THEIR COUNTRY!!!!!!.

China's in another bind with that one; economic growth and high living standards do slow population growth and do cause it to decline, but that growth requires heavy use of resources to get there. At the same time, they need to keep their labor force growing long enough for a productivity base to be developed, which means they almost have to consume more resources.

China can curtail its population growth, but likely at the expense of economic growth in the fairly long term; at the same time, if they do not curtail their population they will suffer far greater economic difficulties down the line. They need to drive productivity, they need to improve resource intenstiy and they need to encourage conservation...however, the nature of their regime prevents those from happening due to a combination of corruption, ideology, and the simple fact that an authoritarian government is not workable with an efficient market. China is really at a crossroads; if they bite the bullet, liberalize their government and free the markets they will be able to achieve at least somewhat the delicate balancing act necessary to keep up growth and simultaneously control resource consumption. If they don't, their economic growth will eventually peak and decline, possibly rapidly with the result being downfall of the Chinese government and severe hardship or instability for an extended period.

Really, the biggest macroeconomic problem China is facing is low productivity; labor is too cheap still to encourage investment in productivity, which encourages population growth and wasteful consumption of resources. However, if productivity were to catch up to the expansion in GDP the product would be high unemployment due to the inefficiency of the Chinese economy...something extremely undesirable to a government already hanging on by a thread in some parts of China. They can conserve a lot, but it seems unlikely that their government is willing to take that risk and it will hurt them; India is taking that risk, and they will reap the benefits...if at the expense of China and similar places.

If China is lucky, there will be a nuclear holocaust which will lower the global population to a reasonable level of radiation-mutated freaks.

The horrendous pollution in China is doing a good enough job of that; the Chinese government mentioned nothing about the massive benzene spill a few months ago until it was almost too late to prepare downriver...we can only speculate at the disasters that go unnoticed or unreported.

Nevertheless, I don't think population control via pollution and mutation is the best policy. :p

I disagree. The title is "China growth unsustainable on all counts, must change: economist". There is no truly economic discussion in the article concerning the issues raised. Hence, I stand by my previous post. I'm criticising the article and the way it is mispresented rather than any of the actual content. My criticism is that the information is being offered as something it is not.The article says that an economist says Chinese growth is unsustainable. A note on Lester Brown:

Brown earned masters degrees in agricultural economics from the University of Maryland and in public administration from Harvard. In 1964, he became an adviser to Secretary of Agriculture Orville Freeman on foreign agricultural policy. In 1966, the Secretary appointed him Administrator of the department's International Agricultural Development Service. In early 1969, he left government to help establish the Overseas Development Council.

Source: http://www.earth-policy.org/About/Lester_bio.htm

So the title is not misleading. Lester Brown, an economist, is saying that Chinese growth is unsustainable. You have to remember that he wasn't lecturing to a class at Harvard Business School, he was talking to the press for public consumption. Under those circumstances you can't expect him to start drawing supply and demand curves and give a full blown macroeconomic explanation that would make sense only to other economists. He is trying to get a message out to everyday people.



This may be a valid analysis. However, it is not economic in nature because there is no discussion on the role of supply and demand in prices, and the effect of those prices in the allocation of resources. There is an implicit assumption that demand will increase, regardless of supply and the resulting prices of said resources. These factors change the dynamic considerably. Again, I'm not disputing the numbers, I'm disputing the article you initially posted being an economic analysis. It is Malthusian worry, however valid that may or may not be. I'm not arguing that the Chinese will have a smooth and wonderful transition to developed consumer-driven economy.
Of course the way that this will play out is that supply of the raw materials necessary to sustain growth will meet physical limitations that will cause wild upward price swings in the face of growing demand that will simply make them too expensive to buy in the quantities necessary to maintain their growth rate, but, in laymen's terms, isn't that simply a complex, detailed way of saying, "There won't be enough stuff?"

"There won't be enough stuff?"

There's always enough stuff if the market is functional...it will just cost $30,000 for a ton of copper or $300 for a barrel of oil. Of course, in practical terms that is the same as saying there won't be enough.

China's in another bind with that one; economic growth and high living standards do slow population growth and do cause it to decline, but that growth requires heavy use of resources to get there. At the same time, they need to keep their labor force growing long enough for a productivity base to be developed, which means they almost have to consume more resources.

China can curtail its population growth, but likely at the expense of economic growth in the fairly long term; at the same time, if they do not curtail their population they will suffer far greater economic difficulties down the line. They need to drive productivity, they need to improve resource intenstiy and they need to encourage conservation...however, the nature of their regime prevents those from happening due to a combination of corruption, ideology, and the simple fact that an authoritarian government is not workable with an efficient market. China is really at a crossroads; if they bite the bullet, liberalize their government and free the markets they will be able to achieve at least somewhat the delicate balancing act necessary to keep up growth and simultaneously control resource consumption. If they don't, their economic growth will eventually peak and decline, possibly rapidly with the result being downfall of the Chinese government and severe hardship or instability for an extended period.

Really, the biggest macroeconomic problem China is facing is low productivity; labor is too cheap still to encourage investment in productivity, which encourages population growth and wasteful consumption of resources. However, if productivity were to catch up to the expansion in GDP the product would be high unemployment due to the inefficiency of the Chinese economy...something extremely undesirable to a government already hanging on by a thread in some parts of China. They can conserve a lot, but it seems unlikely that their government is willing to take that risk and it will hurt them; India is taking that risk, and they will reap the benefits...if at the expense of China and similar places.
I understand the relationship between population and growth. Put simply, if your people live longer you need more young people to make stuff for more old people which means you need more young people to make stuff for more young people. China was facing a graying of it's work force and they are not automated and they are not robotic so they have to rely on arms and legs to do the work of creating an industrialized economy.


But I bet it doesn't work.

I understand the relationship between population and growth. Put simply, if your people live longer you need more young people to make stuff for more old people which means you need more young people to make stuff for more young people. China was facing a graying of it's work force and they are not automated and they are not robotic so they have to rely on arms and legs to do the work of creating an industrialized economy.

But I bet it doesn't work.

Exactly...and it won't work. It is not possible to keep up 10% growth through increases in the labor force alone, and it is not sustainable to substitue new workers for productivity improvements. China will simply not be able to grow unless productivity both catches up to the growth in GDP and surpasses the population growth rate, because otherwise the cycle will continue.

There's always enough stuff if the market is functional...it will just cost $30,000 for a ton of copper or $300 for a barrel of oil. Of course, in practical terms that is the same as saying there won't be enough.
That's my point. It means less has to be shared by more. Whether this is achieved through a command economy, as it probably will in China and Russia, or through a market economy and increasing prices, as it probably will in the West, the result is the same - a dramatic decrease in standard of living.

Personally I would rather be living in a market economy because the profit motive will force people to, in their own self interest, create products and services that will improve the lives of their fellow citizens.

Of course we may just jave a war with China over the last remaining oil reserves in the Middle east and Central Asia in which case all bets are off. Hopefully, there will be so many dometsic problems and the cost of projecting force will be so high that this will distract politicians from going to war and burning through all of these resources by killing one another.

Well, the main problem with that criticism is the simple fact that China does not have a functioning supply-demand model like that in other parts of the world economy. Most of its basic factors of production are either price-controlled, subsidized, or provided by the government without supply or demand being a factor.

*snip*




I agree with you regarding China's internal economy. However, they must purchase all oil that they do not produce on the world market, just like any other nation. Even though OPEC controls and sets a vast segment of the world's supply, increased demand on the world maket ups the price accordingly. We are seeing this happen now. The same is the case for other natural resources.

The 'One-Child Law' never would have met success. It would have merely slowed the exponential grow of their population.It was working. Their growth rate had slowed dramatically and their population was expected to start decreasing in this decade and was expected to plunge in the next.

And it increased the amount of child deaths (usually female) and orphanage populations. What's sad is the fact that the rest of the world must make up for the Chinese slack and adopt the abandoned babies.The whole killing your first child if she was female was dramatically hyped in the West. The fact is we have the same problems here with parents leaving their children in dumpsters, children born to crack addicts, children sold on teh black market etc... The fact that they have such an orphan problem, I think, is more related to the fact that there are over a billion people there than there one child per family rule. People couldn't meet the obligation by giving up a child. If you had one you were violating the rule no matter what you did with the child afterwards.

If China is lucky, there will be a nuclear holocaust which will lower the global population to a reasonable level of radiation-mutated freaks.
Yeah...

That's my point. It means less has to be shared by more. Whether this is achieved through a command economy, as it probably will in China and Russia, or through a market economy and increasing prices, as it probably will in the West, the result is the same - a dramatic decrease in standard of living.

A dramatic decrease for those places that don't diversify away from the scarce resources...those places that do will likely do better economically. If alternatives are dramatically expanded, mitigative laws are enacted, and there is a move towards diversification and conservation by the market (like the replacement of copper with fiber-optics or the use of nanotech to replace bulkier, more intensive products and processes).

I always use the example of the West Coast as a model for mitigative action and the Midwest and New England as examples of areas that will suffer hardship in a post-Peak economic environment. Even Texas, the heart of the oil industry, may emerge as a leader or at least not a laggard; they are supporting alternative energy/fuels fairly strongly for such an oil-industry stronghold and are pursuing fairly strong mass transit programmes in places like Austin. It remains to be seen how they develop over the next few years, but recent policies are promising.

For those places that don't take these steps, the change will be dramatic indeed. The lights likely won't go out and they won't starve, but they will be facing a standard of living not unlike the post-Soviet era in Russia or even postwar Germany. A shortage economy in planned states or a constant inflationary spiral in open-market states could be very, very harsh.

Of course we may just jave a war with China over the last remaining oil reserves in the Middle east and Central Asia in which case all bets are off. Hopefully, there will be so many dometsic problems and the cost of projecting force will be so high that this will distract politicians from going to war and burning through all of these resources by killing one another.

Well, we already spend billions protecting the Straits of Hormuz...I think it would be impossible to extend the kind of protection able to keep resources flowing worldwide. I think most people would prefer to conserve and develop alternatives than to go to war over them, but there are too many people who would be willing to fight or send others to die for them.

There's always enough stuff if the market is functional...it will just cost $30,000 for a ton of copper or $300 for a barrel of oil. Of course, in practical terms that is the same as saying there won't be enough.


My point is that economic behavior changes due to the influence of prices. The article does not acknowledge the other side of the equation. The title bills the article as an economic assessment and falls short, in my opinion.

Again, I'm not disputing the facts presented. I'm splitting a hair here, and I've already hijacked the thread enough! :p

Seriously though, I think the more interesting questions have to do with what happens to China and the world when prices rise? To what extent will supply flex to meet the need?

For example, when the price of oil climbs to a given amount, known reserves that were left alone because they were not profitable, become worth the extra effort to recover.

I agree with you regarding China's internal economy. However, they must purchase all oil that they do not produce on the world market, just like any other nation. Even though OPEC controls and sets a vast segment of the world's supply, increased demand on the world maket ups the price accordingly. We are seeing this happen now. The same is the case for other natural resources.

Well, their government is footing the tab for these products and controlling prices for others. Despite a 30% rise in oil prices since last year, China's fuel prices were only up 7% until last Wednesday...that's driving consumption artificially upward with the result being that they are not being subjected to the market forces that dominate the economic decisionmaking of other, freer markets.

Chinese refiners have been losing money for several years due to this policy; increasingly, they have been forced not to refine oil in order to keep themselves at least somewhat solvent. Diesel shortages are crippling rural areas, and gasoline demand is skyrocketing at the same time...refiners are literally forced to produce enough fuel to meet the demand and then are given free loans from the government to cover costs.

The Chinese economy can't support these subsidies much longer due to their exponential cost increasse that is rapidly outpacing economic growth, tax income or domestic production/conservation.

A dramatic decrease for those places that don't diversify away from the scarce resources...those places that do will likely do better economically. If alternatives are dramatically expanded, mitigative laws are enacted, and there is a move towards diversification and conservation by the market (like the replacement of copper with fiber-optics or the use of nanotech to replace bulkier, more intensive products and processes).

I always use the example of the West Coast as a model for mitigative action and the Midwest and New England as examples of areas that will suffer hardship in a post-Peak economic environment. Even Texas, the heart of the oil industry, may emerge as a leader or at least not a laggard; they are supporting alternative energy/fuels fairly strongly for such an oil-industry stronghold and are pursuing fairly strong mass transit programmes in places like Austin. It remains to be seen how they develop over the next few years, but recent policies are promising.

For those places that don't take these steps, the change will be dramatic indeed. The lights likely won't go out and they won't starve, but they will be facing a standard of living not unlike the post-Soviet era in Russia or even postwar Germany. A shortage economy in planned states or a constant inflationary spiral in open-market states could be very, very harsh.



Well, we already spend billions protecting the Straits of Hormuz...I think it would be impossible to extend the kind of protection able to keep resources flowing worldwide. I think most people would prefer to conserve and develop alternatives than to go to war over them, but there are too many people who would be willing to fight or send others to die for them.
Well, I wasn't after a compaison discussion, but I'll bite. One of the main things you need to remember is that in North America and Europe we have a built infrastructure. In China they do not. The reason the cost of steel and concrete have risen so dramatically is that they are rushing to build it. We are in a position of trying to hold on to what we have. They are trying to get what we've got.


Man, I'm good at this. I should make a living over simplifying things for the average Joe.

Well, their government is footing the tab for these products and controlling prices for others.

*snip*

The Chinese economy can't support these subsidies much longer due to their exponential cost increasse that is rapidly outpacing economic growth, tax income or domestic production/conservation.


Exactly, which is why we will never get to the numbers presented (at least not because of Chinese growth). Their economy is on borrowed - or taxed - time as it is.

I agree with you regarding China's internal economy. However, they must purchase all oil that they do not produce on the world market, just like any other nation. Even though OPEC controls and sets a vast segment of the world's supply, increased demand on the world maket ups the price accordingly. We are seeing this happen now. The same is the case for other natural resources.
I'm of teh opinion that OPEC has lost control of the price of oil on the downside. They're all pumping as fast as they can and I see no way that, even if their ambitious capacity increasing projects work, that they will be able to meet projected demand. I simply don't beleive that the world will ever be able to pump 120 million barrels/day.

My point is that economic behavior changes due to the influence of prices. The article does not acknowledge the other side of the equation. The title bills the article as an economic assessment and falls short, in my opinion.

I think that is a valid argument; however, China may not have those kind of behavor changes until their subsidy system collapses...right now, there is almost no flexibility of demand or incentive to conserve due to billions in unsustainable government handouts.

Seriously though, I think the more interesting questions have to do with what happens to China and the world when prices rise? To what extent will supply flex to meet the need?

Well, it really depends on the intensity of resource consumption. In the developed world, a lot of our oil demand is discretionary in nature as is other resource consumption; conservation, substitution, and technology can address the problem but only if people actually use them. Demand will always meet supply, and will have to decline to keep them balanced; whether that decline is due to the aforementioned factors or economic collapse depends highly on the decisions made by each market to adjust to the trend.

Speaking of oil, rising supply will continue in the short term, but will eventually level off and decline with the result being that demand will have to flex to keep in equilibrium with declines in supply. Fortunately, this will be preceded by higher prices and volatility which will motivate falling consumption, but the ability of that to mitigate post-peak price spikes will depend a lot on the degree to which these moves are integrated in to the economy. Most alternative energy is viable and is superior to oil in terms of energy which is a plus as we approach a peak in production.

Other resources will eventually peak due to cost of production factors but most of them are either extremely abundant, replaceable/conservable or recycleable. By the time they approach their peaks on Earth, we will be at a much higher technological and productivity level and will be able to tap resources from other places...be it moons, asteroids, or planets. The ability to recycle is a powerful tool that oil does not really have; if recycling is optimized, you could greatly reduce real consumption for extended periods and that has a huge effect on prices.

For example, when the price of oil climbs to a given amount, known reserves that were left alone because they were not profitable, become worth the extra effort to recover.

However, that has problems in itself. The oil will not run out physically, but it will get so expensive to keep up production that there will be no profit in it at any price and it will start to decline; demand will also plunge as subsititution, conservation, and efficiency improvements all take effect but that will not reverse the trend of higher production costs. Technology will reduce costs, but eventually it starts to increase asymptotically and becomes totally unaffordable despite technology or productivity gains.

Well, I wasn't after a compaison discussion, but I'll bite. One of the main things you need to remember is that in North America and Europe we have a built infrastructure. In China they do not. The reason the cost of steel and concrete have risen so dramatically is that they are rushing to build it. We are in a position of trying to hold on to what we have. They are trying to get what we've got.

I agree, so there isn't much I can say about this.

Man, I'm good at this. I should make a living over simplifying things for the average Joe.

Perhaps if it were simplified, more people would be aware of it...always a good thing.

I'm of teh opinion that OPEC has lost control of the price of oil on the downside. They're all pumping as fast as they can and I see no way that, even if their ambitious capacity increasing projects work, that they will be able to meet projected demand. I simply don't beleive that the world will ever be able to pump 120 million barrels/day.

Well, OPEC has to deal with a market that is much more liberalized and much more competitive than it was in 1960, 1973, or even 1999. That market makes it much harder for them to control prices by its very nature, to say nothing of the huge supply demands that will be placed on them in the near future.

If we examine the data further, oil prices in adjusted terms are little more expensive than they were in 2000. If you strip away the risk premium and the depreciation of the dollar since that year you get a price only about 30% higher than it was in that year; adjusting for general inflation lowers that gap even further.

Interestingly, that translates to a yearly rate surprisingly close to the real rate of global GDP growth since 2000.

The Chinese govt, to their credit, is trying to slow down growth. It just ain't working. There's been 10% growth rate year on year for the last 3 decades, though admittedly it was starting from an absolute shit position. (as an aside, someone estimated that the loss to the Chinese economy during the 10 years of the Cultural revolution was greater than the combined economic investment over the previous 40 years. It cost China hundreds of Billions)

The pollution thing is getting way out of control. Unfortunately, they're showing little interest in controlling it.
Here in Hong Kong, the politicians have their heads firmly buried in the sand (or up their butts) over the pollution problems China gives us.
May 1st to May 7th is called the "Golden Week' in China, as it's a week-long holiday. All the factories in Shenzhen (the border town in China) close down.
Here's what HK looked like the week before Golden Week:
http://www.york.ac.uk/inst/sei/undesa/smog-HKjpg.jpg
This is a photo of Hong Kong at the end of Golden Week, after a full week of the factories not operating:
http://www.hotelsasian.com/images/Hong_Kong_Harbor_view.jpg
Amazingly, the local politicians said it was just coincidence! So nothing needed to be done or said about the factories.

If that sort of state-of-denial exists in HK, imagine what it's like in China!

If China is lucky, there will be a nuclear holocaust which will lower the global population to a reasonable level of radiation-mutated freaks.

Thats what I was going to suggest. Hell, someone should do it just to see what happens. It can't be worse than everyone living in poverty upto their eyebrows.

The Chinese govt, to their credit, is trying to slow down growth. It just ain't working. There's been 10% growth rate year on year for the last 3 decades, though admittedly it was starting from an absolute shit position. (as an aside, someone estimated that the loss to the Chinese economy during the 10 years of the Cultural revolution was greater than the combined economic investment over the previous 40 years. It cost China hundreds of Billions)

The pollution thing is getting way out of control. Unfortunately, they're showing little interest in controlling it.
Here in Hong Kong, the politicians have their heads firmly buried in the sand (or up their butts) over the pollution problems China gives us.
May 1st to May 7th is called the "Golden Week' in China, as it's a week-long holiday. All the factories in Shenzhen (the border town in China) close down.
Here's what HK looked like the week before Golden Week:
http://www.york.ac.uk/inst/sei/undesa/smog-HKjpg.jpg
This is a photo of Hong Kong at the end of Golden Week, after a full week of the factories not operating:
http://www.hotelsasian.com/images/Hong_Kong_Harbor_view.jpg
Amazingly, the local politicians said it was just coincidence! So nothing needed to be done or said about the factories.

If that sort of state-of-denial exists in HK, imagine what it's like in China!
Yeah, that's another problem. The famous Asian borwn cloud.

http://www.usnews.com/usnews/culture/articles/030317/17haze.htm

V. "Ram" Ramanathan sat on an airliner heading south from Bombay. Ahead were the Maldives, an archipelago near the equator, where the atmospheric scientist from the Scripps Institution of Oceanography near San Diego planned to set up instruments to study haze and weather. He expected that results from the international project would come slowly and be of interest only to specialists. He was not prepared for what he saw just gazing out the plane window.
As he took off from Bombay, the layers of brown gunk in the sky were no surprise. Pollution controls on factories and vehicles are rare in his native land. Hundreds of millions of its citizens burn low-quality coal, wood, and cow dung for cooking and heating. But nearly 1,000 miles later over the open sea, the dirty pall still had not given way to blue sky and white clouds. "The haze just kept going and going. It didn't even seem to thin out. I was thinking, this is something big."

Yeah, the potential for some real problems in China has me a bit worried. I like China well enough (not the government - the country and people itself), but it seems like I've been hearing a growing number of economists express some very real concerns about the Chinese economy overheating.

Couple this with the fact that:
1. China's society is rapidly ageing.
2. The rural population has been left behind, and a number of scattered peasant revolts have given the government reason to sweat behind the scenes.
3. The country simply cannot sustain itself, ecologically at its current rate of resource consumption.

To top it all off, I genuinely believe that China lacks the sort of leadership to tackle all of the impending problems with any effectiveness. The CCP leadership, for all of the positive spin that comes out of Xinhua and other state-run organs, still comes off as being rather bumbling when it comes to managing the country's affairs.

Not only China, but the economic growth of almost every nation on Earth is unsustainable in the long run.

Not only China, but the economic growth of almost every nation on Earth is unsustainable in the long run.
Yeah, but market forces have already been having an effect on peoples' consumption and a heightening awareness of the effects our consumption has on the economy in the West and Japan has given me some cause to be mildly optimistic.

Well, OPEC has to deal with a market that is much more liberalized and much more competitive than it was in 1960, 1973, or even 1999. That market makes it much harder for them to control prices by its very nature, to say nothing of the huge supply demands that will be placed on them in the near future.

If we examine the data further, oil prices in adjusted terms are little more expensive than they were in 2000. If you strip away the risk premium and the depreciation of the dollar since that year you get a price only about 30% higher than it was in that year; adjusting for general inflation lowers that gap even further.

Interestingly, that translates to a yearly rate surprisingly close to the real rate of global GDP growth since 2000.
None of that is the point. They can't drive the price of oil down now because they can't increase capacity. This has never been the case in modern history. We have always been able to turn up the flow when necessary. That does not mean we always have. During the Arab Oil Embargo the capacity to keep the price down existed, but for political reasons it was not being used. Same as the Iranian Revolution in '79. The capacity existed, it was politics that got in the way of supply. This time it's geological. You can't go to the table and negotiate with geology. It's simply a barrier. You can't change or overcome it for long. How much elasticity in supply of a finite commodity can you expect?

This guy just lays it out as simple as can be. This is why people who expect Chinese growth into a major industrial superpower are probably going to be surprised over the next ten to twenty years as that trend is reversed. The numbers simply aren't there. The resources necessary to turn 1.5 billion Chinese into American/European style consumers simply don't exist. I've included a commentary from the website I pulled the article from, though it was originally published on Yahoo News. (http://news.yahoo.com/s/afp/20060530/sc_afp/chinaenvironment_060530175508)



http://www.energybulletin.net/16626.html

not if they keep killing their best thinkers,and selling off their women into prostitution.

not if they keep killing their best thinkers,and selling off their women into prostitution.
Yeah, but we're raising a generation of morons and, in case you haven't noticed, there are a lot of prostitutes here, too.

This is environmentalism being pushed off as economics. These are, in essence, two separate things.

While enviromentalism and economics are seperate things, the economy does affect the enviroment.

Not only China, but the economic growth of almost every nation on Earth is unsustainable in the long run.

Growth is always sustainable and desirable because it drives innovation and efficiency, which in turn increase the ability of the environment to sustain that additional growth.

The main problem is that our concept of "growth" is starting to conflict with reality; GDP figures are routinely understated because a lot of intellectual-property and technological growth (like Internet commerce and the like) do not get counted, and a lot of emphasis is still placed on resource intensive industries rather than technologically-drive ones.

Focusing on resource intensive and low-tech industry is what is unsustainable, not the concept of growth itself.

None of that is the point. They can't drive the price of oil down now because they can't increase capacity. This has never been the case in modern history. We have always been able to turn up the flow when necessary. That does not mean we always have. During the Arab Oil Embargo the capacity to keep the price down existed, but for political reasons it was not being used. Same as the Iranian Revolution in '79. The capacity existed, it was politics that got in the way of supply. This time it's geological. You can't go to the table and negotiate with geology. It's simply a barrier. You can't change or overcome it for long. How much elasticity in supply of a finite commodity can you expect?

Only very short term elasticity; in the long term, the trend is going to be upward. Even if you could boost production indefinitely, the cost would keep rising until it simply became too expensive...it's pretty much a given that oil will not run out before we stop using it simply because it will be too expensive to use and produce.

Fossil fuels are unique in that they are the only commodities that will peak and run out; unlike other commodities that are destroyed when consumed like wheat, cotton, ethanol or sugar, oil is not renewable at a rate sufficient to keep up with demand.

China has a population of over one billion. That is a huge potential for minds to concern themselves with economic problems. If the problem is really serious, then China will engage these minds in seeking solutions.

Gone are the days where China was seeking to maintain an ideology at all costs, today China's motto is 'hyperpower or bust', their goal is world dominance of China, even the CCP itself would be willing to sacrifice their authority to improve the economy. And they now coming to realise that their people are their most valuable commodity, and having such a huge human capital, and ever-increasing economic freedom means that China is very _very_ adaptable. China may face an economic wobble, but it will adapt.

China has a population of over one billion. That is a huge potential for minds to concern themselves with economic problems. If the problem is really serious, then China will engage these minds in seeking solutions.

Gone are the days where China was seeking to maintain an ideology at all costs, today China's motto is 'hyperpower or bust', their goal is world dominance of China, even the CCP itself would be willing to sacrifice their authority to improve the economy. And they now coming to realise that their people are their most valuable commodity, and having such a huge human capital, and ever-increasing economic freedom means that China is very _very_ adaptable. China may face an economic wobble, but it will adapt.
You simply can't argue with the numbers. The fact is you can think of a factory all you want, until you actually build it it doesn't matter.

China's productivity is actually increasing greatly so much so that the manufacturing jobs are actually declining Meanwhile service oriented jobs are increasing.

"China's industrial labor productivity growth exploded at a 17% annual rate between 1995 and 2002. As in the more developed countries, this rise in productivity comes from improved technologies and the reallocation of resources from lower to higher value activities."

"27 of the 38 industries in China saw annual average productivity growth of over 10%. Steel production saw a job loss of 557,000 jobs, but actual production has soared."

"A large part of this "productivity miracle" is simply the government selling large, bloated industries and the new owners down-sizing the employee rolls, yet producing more. Even with private manufacturing industry in China adding 9 million new jobs, there was a net loss of 4 million manufacturing jobs in China in the period."

http://www.safehaven.com/article-1772.htm

As Market forces contunue to act on the Chinese economy wages will contunue to rise. Labour shortages are already begining to appear in major industral centers. Though because of China's massive population it will still have supplies of cheap labour throughout the country for decades to come. When wages grow to much, low-tech, low-skill, low wage jobs will shift to new areas and middle-high tech, will replace them.

Is the current rate of economy growth sustainable? Absolutly not. It WILL slow down as the Chinese economy matures.

Is it the only country to achieve this rapid rate of growth? Absolutly not, During the economic growth bonanza of the Japanese economy (50-60's) and Taiwanese, South Korean economies(70's-80's) GDP growth rates of 10%-12% were not uncommon. Chinese growth has been slower(8-10%).

China's productivity is actually increasing greatly so much so that the manufacturing jobs are actually declining Meanwhile service oriented jobs are increasing.

"China's industrial labor productivity growth exploded at a 17% annual rate between 1995 and 2002. As in the more developed countries, this rise in productivity comes from improved technologies and the reallocation of resources from lower to higher value activities."

"27 of the 38 industries in China saw annual average productivity growth of over 10%. Steel production saw a job loss of 557,000 jobs, but actual production has soared."

"A large part of this "productivity miracle" is simply the government selling large, bloated industries and the new owners down-sizing the employee rolls, yet producing more. Even with private manufacturing industry in China adding 9 million new jobs, there was a net loss of 4 million manufacturing jobs in China in the period."

http://www.safehaven.com/article-1772.htm

As Market forces contunue to act on the Chinese economy wages will contunue to rise. Labour shortages are already begining to appear in major industral centers. Though because of China's massive population it will still have supplies of cheap labour throughout the country for decades to come. When wages grow to much, low-tech, low-skill, low wage jobs will shift to new areas and middle-high tech, will replace them.

Is the current rate of economy growth sustainable? Absolutly not. It WILL slow down as the Chinese economy matures.

Is it the only country to achieve this rapid rate of growth? Absolutly not, During the economic growth bonanza of the Japanese economy (50-60's) and Taiwanese, South Korean economies(70's-80's) GDP growth rates of 10%-12% were not uncommon. Chinese growth has been slower(8-10%).
Please take a minute to read the article. You completely missed the point. It's about the resources necessary for them to sustain this growth and whether they will even be available. For example:

"If oil consumption per person reaches the US level by 2031, China will use 99 million barrels a day.

"The world is currently producing 84 million barrels a day and may never produce much more."

If three out of every four people in China own cars, as in the United States, there will be 1.1 billion vehicles on Chinese roads, compared to the current world fleet of 800 million, Brown said.

Please take a minute to read the article. You completely missed the point. It's about the resources necessary for them to sustain this growth and whether they will even be available. For example:
The thread seemed to skew a bit from the orginal topic, however I have read the article.

Overall I would agree it is not sustainable from an environmental standpoint. The problem is: How do they develop there economy and increase standards of living without creating a "western style" consumer economy.

The thread seemed to skew a bit from the orginal topic, however I have read the article.

Overall I would agree it is not sustainable from an environmental standpoint. The problem is: How do they develop there economy and increase standards of living without creating a "western style" consumer economy.
Though I recognize the environmental angle to teh original article, really what my point is is about, where are they going to get the oil? Where are they going to get the copper? Where are they going to get the steel? Where are they going to get the concrete? Where are they going to get the platinum? Irridium? Valadium? Aluminum? How are they going to build the roads? It's unsustainable because there won't be enough stuff.