DETROIT (ResourceInvestor.com) -- This article is about one part of the Chinese plan for economic independence, not interdependence, in a global economy in which China, itself, has become, perhaps, the driving engine of demand for commodities. A place formerly held, and for a very long time, by the United States, and still held by the United States in the minds of many investment advice-giving financial analysts. The part of the Chinese plan for economic independence I wish to discuss can be called the gathering and control of the natural resources necessary for a modern industrial economy.

The Chinese do not believe that the end result of their, strictly supervised by the government and intentionally limited, foray into a mixed planned and market driven economy should be that anyone with money can buy, and has the right to buy, anything they want. They believe that a great nation must first and foremost control sufficient natural resources and energy to be independent of the needs or desires of any other nation. They have entered into the global marketplace only to fulfill that purpose. This is the basis of what I call the ‘gold war’ that has supplanted the earlier unsuccessful cold war waged by the late Soviet Union. The Chinese have realized, as the Russians never did, that if a nation hopes to be powerful and respected it must first be economically self sufficient and bring first to its own people the superior benefits it claims for its political system as a global role model.

The Soviet Union never had the ability to wage the gold war, but its remnants, principally Russia, have immense natural resources, including oil, that I believe will ultimately be developed mainly to the benefit of China. Investors who believe that the ideal level playing field defined by the American Arabist scholar and journalist, Thomas Friedman, in his recent book, The Earth is Flat, is a universal, logical and natural goal are deluding themselves.

I intentionally use the old British diplomatist’s term, Arabist, above, because it is correct as well as outdated. By contrast the modern term ‘emerging markets’ (previously ‘emerging nations’) is not correct when applied to the rapidly growing economies of China and India. Investing in emerging markets without paying attention to global politics is, for Americans, a get rich quick scheme that is not played on a level field at all. Each time an emerging nation violates a tenet of the received capitalist dogma such as Russia did when it ignored the rule that sovereign nations do not default on their debts we say that the emerging nation has learned its lesson. It has stolen billions of dollars of our wealth and converted it to its own use-this is called larceny by conversion in the Anglo-Saxon jurisprudence-and we will not ‘lend’ it any more for a few years. Note well that we never seem to learn our lesson, as we return to lending to Russia, for example, that it is the playing field that is not level! It is hard for me to imagine a better way to compare the differences between the response of the American business community and the Chinese polity to globalization than to examine the success story of China in Africa.

The Chinese in Africa are fighting an ongoing battle in the gold war that I characterized last week as the successor to the cold war. Chinese globalism is making headway against western, primarily American, globalization. The Chinese are using American money, gathered as one of two low labour cost countries that also have immense, mostly untapped by western goods, domestic markets, to implement the long-term strategic goal of Chinese economic self sufficiency through ownership-economic control-of natural resources and energy.

The Chinese rulers know well that their time as the leading low labour cost country is limited, and they are using the immense profits on a massive drive for technology and resources that will allow the Chinese domestic economy to prosper when their time as the number one low labour cost country is over. The day will come when the labour portion of the cost of manufacturing a television set is the same in China as it is in America. On that day the economy that has the technology and the control over the necessary natural resources including energy will be the winner. Who would you bet on right now?

China values education in engineering and the sciences and gives access not only to its own universities but also, through full scholarship programs, to the, for the moment, greatest universities of the western world. The only requirement for all students is that they demonstrate the potential to be successful in a program of scientific or engineering study. Additionally those qualified students who apply for overseas study must demonstrate an adherence to Chinese political values. I personally have rarely heard of a Chinese student going overseas to learn how to be a political revolutionary when he or she returns.

Like all communist countries China has and still is undertaking huge domestic engineering projects like the construction of dams for power engineering and agriculture. The former Soviet Union did the same thing, but its projects were characterized by poor planning, poor logistics, low quality raw materials, and no plan on how to integrate the output of the project into the local economy.

The Soviet Union equated huge engineering projects with political influence and military power. It could not show the underdeveloped economies of Africa how to create wealth, because, the Soviet Union itself didn’t know how to do that. Instead the Soviets offered the so-called president-for-life dictators of the then new ‘socialist’ African republics such as Egypt the only way they knew to develop economies. The Soviet Union offered to engineer and construct huge engineering projects in countries where they wished to have influence that they planned to develop into the creation of communist states.

The Aswan High Dam inaugurated 50 years ago in Egypt as a gift to the people of Egypt from the people of the Soviet Union had a ghastly series of unintended consequences that exposed the sole purpose of Soviet foreign policy to be the buying of influence in the largest country in the region. Originally envisioned by a conservative American administration to shore up American foreign policy in the region and to push Egyptian agriculture to self sufficiency the project fell into the willing hands of the Soviets when the Egyptian monarchy was overthrown in the aftermath of the decline of British and French power in the region, and even though it was Eisenhower’s America that stopped the British-French-Israeli seizure of the Suez Canal the financial risk of the venture (the U.S. government would have to guarantee payment before any western contractor would step in), and America’s continued support for Israel made the Egyptians intractable.

Cost overruns, inferior Soviet cement and engineering and Egypt’s endless needs for money to develop the infrastructure to utilize the dam infuriated the (Soviet) Russians, and no future Soviet leader ever found the need to contradict Nikita Khrushchev’s oath taken at the dedication ceremony that no more Soviet money would ever be wasted on such projects.

After Aswan the Soviets continued to arm revolutionaries against colonialism and imperialism in sub Saharan Africa, famously in the Congo, Kenya, Mozambique and The Republic of South Africa, but they often required payment and that only in the most valuable raw materials such as diamonds and gold that could be sold invisibly into the world market where the blood would be washed off of the stones and bars and replaced with U.S. dollars. Over the years after Aswan the Soviets continued to sell and give their cement, grain, and steel to sub Saharan African countries where to this day grotesque solid concrete piles near or on former docks testify to the ignorance of the Soviets with regard to packaging moisture sensitive products for shipment to tropical climates.

The modern Chinese have learned from the mistakes of the former Soviet Union in Africa and have benefited from the ongoing lack of interest in African raw materials by American businessmen.

The chairman of the U.K.’s “Standard Chartered,” a long established banking institution with traditions stretching back to the days of the British Empire and Imperial preferences said today:

“Standard Chartered reckons that in spite of increased volatility in global markets, increasing oil prices and an increased aversion to risk affecting emerging markets, overall conditions are good for its continued success.

“The market is not altogether convinced, marking shares (STAN) down around 2% to £12.84.

“Nonetheless, chairman Bryan Sanderson made a strong case for why everything points to increased wealth, stability and growth fuelled by the development of 'new trading corridors' such as those opening up between China and Africa. He said this was worth just $6.5 billion in 1999, but was up to $40 billion last year, which was a 'clear indication' of shifting ties and socio-economic change in emerging markets.”

Chinese trading with Africa, mainly in the sub Saharan area, has gone from $6.5 billion in 1999 to $40 billion per annum just the last 7 years. Chinese investment in Africa, primarily, in terms of gross dollars-yes, U.S. dollars!- in power plants, mining infrastructure, mining itself, smelting and refining is in the billions of dollars per year, while American investment, not foreign aid, has been languishing with the sole exception of Nigeria and even there it is primarily into the oil producing and refining sector.

Foreign aid is a government sponsored institution. Investment by America comes from the business community. The American government does aid small businessmen through guarantees of payment by the U.S. Export-Import Bank, for example, but large investments are made by large companies that must prove bankability to their lenders to get the money. Issues of strategic importance and value to America as a whole don’t carry much weight with even American bankers. The Chinese polity does the one, aid, in the service of the other, investment.

In American business globalization means the maximization of profit through keeping down costs and the attempt to open foreign markets. There is ‘drive towards China’ frenzy that is based on an illusion of mistaking the engagement of the Chinese polity in the global marketplace for the engagement of an ‘independent’ Chinese business community in the global marketplace.

The Chinese polity is different from yours and mine, it has more money, and it is only interested in the long-term value to China of any industrial project.

The goal of American investment is only short-term profit. Contributions by American corporations to foreign aid are for the purpose of marketing. Chinese corporations and the Chinese government have but a single goal: the economic independence of China.

By that simple standard Chinese business is serving the state at all times.

The Chinese government does only what it must do to maintain the illusion that the domestic Chinese business climate is moving towards transparency, full participation in the international marketplace, and the opening of China’s domestic market to all comers. The nervousness of the western world’s business community with regards to the promises of openness made by the Chinese government are spelled out well in an article in today’s Financial Times called “Foreign Deals in China Hit New Resistance.”

American businessmen believe that the goal of globalization is a world market in which the flow of capital is unhindered by national interest, i.e., Thomas Friedman’s level playing field. The Chinese polity operates on the basis of domestic preference. China will participate wherever it has an advantage in the global marketplace for its goods and services, but, so far, it will not allow foreign capital to influence decision making or adherence to the nation’s policies of self interest by its independent businessmen.

The Chinese export clothing, domestic appliances, machinery, heavy equipment, aircraft and, of course, weapons to Africa. The South African minister of trade comments that China has replaced the European empires in these items and in thereby creating a large imbalance of trade in China’s favour with his country (and others in the region). South African producers of ferrochrome complain that their country’s producers of chromite ore have long-term off-take agreements with Chinese companies, so that South African ore is used to produce ferrochrome in China rather than in South Africa.

A recent article on AllAfrica.com summarizes African response to the Chinese affect on the African economies. It is aptly titled: “PanAfrica: Continent Benefits From Links With China, Must Boost Capacities.”

The Chinese are financing, engineering and building a dam in Mozambique to provide electric power for agriculture and local development and for manufacturing metals by electro-refining. The Bank of China is open to guarantees of aluminium and other metals, at prices negotiated today, as payment of the loan for the dam and its generating equipment and for the technicians and

China and Zimbabwe are ‘friends.’ The megalomaniacal president for life, Robert Mugabe is now once again being feted in Beijing while he agrees to more Chinese ‘investment’ in, among other minerals, platinum and rhodium. Repayment of course to be in those metals at a negotiated price.

There are no Chinese troops in sub Saharan Africa. There are instead the economic imperialists who are implementing the long-term plans of the Central Committee of the Chinese People’s Communist Party for Chinese economic independence. The new globalist ‘businessmen’ of China.

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