Last year, China’s imports of several basic resources exceeded records, with imports of all commodities increasing by 16% in volume terms. They are continuing to increase, up 6% in the first five months of the year. Given the country’s economic woes, this does not reflect increased consumption. Instead, China looks to be rapidly hoarding materials—especially at a time when commodities are expensive. Beijing policymakers appear concerned about new geopolitical concerns, particularly the possibility that a new, hardline American president could attempt to sever critical supply routes to China.
The anxiety is justified, as China relies on foreign resources. Despite being the world’s refining center for numerous metals, it imports a large portion of the raw materials needed, ranging from 70% bauxite to 97% cobalt. China relies entirely on imported energy to power its lights. It possesses a lot of coal, but its other fuel reserves are insufficient to meet its demands, causing it to import 40% of its natural gas and 70% of its crude oil. China is also dependent on importing food. In 2000, practically everything citizens ate was made at home; today, less than two-thirds is. The country imports 85% of the 125 million tonnes of soya beans it consumes annually.
Recognizing this vulnerability, China began constructing “strategic” stocks of grain and defense-related minerals after the conclusion of the Cold War, which it later expanded with petroleum and industrial metals at the height of its economic growth. Three recent events have produced increased stockpiles. In 2018, President Donald Trump levied $60 billion in tariffs on Chinese goods, prompting China to counter by levying levies on American soybeans. Next came covid-19, which disrupted supply systems and increased material costs. The war in Ukraine then drove up prices and demonstrated America’s willingness to utilize embargoes.
China looks to be preparing for a more hostile environment. Its preparations begin with the expansion of the storage infrastructure. Unlike in the United States, where strategic reserves are held by the government, in China they take the form of private tanks, silos, and warehouses that Beijing officials can employ during times of crisis.
Since 2020, China’s crude storage capacity has risen from 1.7 billion to 2 billion barrels. Many of these facilities are hidden, but satellite photography shows that recognized ones have expanded rapidly since 2022, according to Emma Li of Vortexa, a data firm. Similarly, the capacity of underground gas caves increased sixfold between 2010 and 2020, to 15 billion cubic metres (bcm); the goal is to reach 55 billion by next year. China is also constructing a dozen or so tanks to store liquefied gas near its coastline. JPMorgan Chase predicts that overall gas storage capacity will reach 85 billion cubic meters by 2030.
Source: Economist
Photo credit: Foreign Policy
