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01.04.2004
Expert: China causing global inflation
Byline: Clarence Chua
PETALING JAYA: China’s bottomless demand for natural resources to fuel its bourgeoning economy is causing global inflation, says an expert on the country.
University of Illinois, Urbana-Champaign, Centre for East Asian and Pacific Studies director Prof George T. Yu said the mainland imported 100 million tonnes of crude oil or 7.4% of the global consumption last year, making it the second largest importer after the United States.
In the corresponding period, China was the biggest importer of iron ore, top consumer of steel, and used 31% of the global demand for coal, 25% of aluminium and 40% of cement.
“As the standard of living improves in China, the demand for cars, ice boxes and refrigerators increases. These products need raw materials, which China doesn’t have, and depend heavily on imports,” he said when delivering a public lecture on Rising China: The Present and the Future at Menara Star here yesterday.
In response to a question by Malaysian Investors Association president Datuk Dr P.H.S. Lim, Yu acknowledged that the boom in China had also caused problems.
Yu said a steady stream of metals, oil and foodstuffs was producing a logjam as importers could not secure enough trucks or space on railways.
This, he said, had indirectly caused prices of other materials to increase in other countries, including Malaysia.
Yu also warned that Asia could feel the pinch if demand from the world’s sixth-largest economy stuttered.
“I don’t want to paint an overly-rosy picture about China. It is riding on an bubble, and countries must adjust or learn to adjust when the bubble bursts,” he said.
He also said the rise of China could challenge the United States for influence in the region.
However, continuous economic growth would require China to engage in friendly relations with its neighbours, he said.
On the question of Taiwan, he said that no Chinese leader would feel safe and legitimate if he failed to stand firm on the Taiwan issue.
Later, Dr Lim said in an interview that freight charges had increased by 400% over the last few years as ships scrambled to Chinese ports to fill a behemoth economy that grew by 9.1% in 2003.
“Previously it took four days for ships to unload, now it takes more than a month. The lack of ships is the cause of the inflation. The good news is that China is buying more timber, palm oil and raw materials from us, but on the other side they are dumping cheap goods into our market.”
He added that China attracted US$60bil (RM228bil) in foreign direct investment. “This will only create more unemployment in the region,” he said.
The lecture was jointly organised by Universiti Kebangsaan Malaysia’s Institute of International and Malaysian Studies, Star Publications (M) Bhd and the Asian Centre for Media Studies.
Pix: Yu: Says China has bottomless demand for natural resources to fuel its bourgeoning economy
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