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My first visit to China was in 1986; my second was in 2010. The difference between the two visits was profound. Within one generation, it seemed as if everything except the Forbidden City and the Great Wall had changed. Cars had replaced bicycles, shining office towers had replaced ramshackle tenements, and consumerism had replaced the dreary economic hopelessness that many Chinese previously endured.
Which is not to say all is well there. Newly acquired wealth exists side by side with abject poverty. Stunning natural beauty contrasts with choking pollution. And overseeing the country's dramatic change is the Communist Party leadership, which remains jealous of its 60-year monopoly on political power and is unwilling to tolerate any challenge to its rule.
To maintain legitimacy and power, the government has made a strategic bet - that it can keep political control by allowing and even encouraging economic liberalization. Growth and job creation are the keys to making this strategy work, and have become a virtual obsession of Chinese leaders. According to the International Monetary Fund, China accounted for almost a fifth of world growth in 2010. Exports have been and continue to be critical to this success; China uses an undervalued currency as a tool to keep global demand for its exports high.
Production, however, requires inputs, and exports require raw materials. Thus, over the past 10 years, China has been on a global hunt for the raw materials that it needs to keep its production lines humming and its people employed, including the additional millions who join the work force every year. Coal, oil and gas, ores and minerals, soy and other agricultural goods: Chinese demand for these has caused a secular shift in global commodities markets.
China's leaders, moreover, are not content to leave their procurement efforts to the vagaries of global markets. Rather, they seek long-term, guaranteed access to raw materials, in some cases even looking to control the means of production and in-country infrastructure such as ports and rail. Raw materials are then turned into value-added products and re-exported from China around the world.
This is a transparently mercantilist strategy, with domestic political requirements at its core. It is a strategy designed, fundamentally, to keep the ruling party in power. It is not...