In search of a new China: mineral demand in South and Southeast Asia

David Humphreys

doi:10.1007/s13563-017-0118-7

Abstract

China’s industrialisation transformed global markets for mineral commodities. As growth in China slows and becomes less material intensive, the question arises whether countries of South and Southeast Asia can take up the baton from China and give a further boost to global mineral demand. The economic prospects of South and Southeast Asia are undoubtedly promising, helped by growing populations and a fast-expanding middle class. However, the model of growth being embraced by these countries is different from that of China and likely to be less material intensive. Also, many of them are economically coming off a very low base. With respect to the supply of minerals to the region, the impact of India’s growth on global mineral markets will be limited by the fact that many of India’s mineral needs can be met from domestic sources. In Southeast Asia, some of the mineral requirements will be met from domestic resources while some of its requirements for finished metals will likely continue to be met from China which is a heavy investor in the region and which has massive surplus metallurgical capacity.

Highlights

Asia has reshaped the global demand for minerals over the past 20 years and is set to play a big part in shaping it over the 20
In the mid-1990s, China accounted for some 10–15% of global mineral demand
Comprising countries highly disparate in their nature, and obviously lacking the economic cohesion of China, collectively the region has enormous untapped economic potential

Summary

Introduction

Asia has reshaped the global demand for minerals over the past 20 years and is set to play a big part in shaping it over the 20. In 2015, a record year for China outward FDI, with a total FDI spend of US$146 billion, investment in OBOR countries showed a 39% increase on 2014 (Xinhua 2016) The effect of this expenditure should be to knit large tracts of Asia together economically and to provide access to markets further west. In the northern part of Asean, which is to say in the CLMV countries, there may well be scope for increased mine production, the emerging economic model appears to be more focused on manufacturing activity and in keying this manufacturing into the supply chains of the more northerly parts of Asia For which reason, it may well follow the development pattern of the countries of North Asia and import the greater part of its raw material requirements. Given that most of the money for OBOR projects is coming from China and that a big role will be played by Chinese contractors in building out the infrastructure under the programme, it may be assumed that many of the mineral raw materials required for these investments will be sourced from China

Concluding remarks

Findings

60 Other Asia