By All Means Necessary (4 page)

Yet at its political core China was weak. The emperor's inability to defend Nanjing against the Taiping Rebellion spurred provincial rulers to take a larger role in creating their own infrastructure and weapons industries to aid in the Qing's fight against the rebels. These regional rulers became a new generation of powerful provincial governors with their own militaries, economies, tax systems, and devoted followers. Eventually, this fragmentation contributed to the “Warlord Era” that followed the Qing's downfall in 1911, resulting in a period of disarray and division in China.

Efforts made by competing political forces to establish a united government in the immediate aftermath of the collapse of the Qing dynasty foundered, and from 1916 to 1927 the country descended into a dark and violent period of competition for control by military warlords. The country was fragmented, with little central government control outside the capital of Beijing.
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Eventually the
Nationalist Party (Kuomintang, or KMT), which had been established in 1912 but failed to unite the country, joined forces with the newly emergent Chinese Communist Party (CCP) in the 1920s to undermine the warlords and unify the country. But in April 1927, the leader of the Nationalist Party, General Chiang Kai-shek, and his supporters turned on their Communist collaborators, killing as many as twenty thousand and forcing the rest underground.
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Chiang Kai-shek established the Republic of China and began to regain control over important government functions such as setting trade tariffs and operating the Maritime Customs Service. The government also reduced the number of foreign concessions in China from thirty-three to nineteen. The war with Japan prompted the government, in 1935, to expand the mission of its defense planning effort through the National Defense Planning Commission to include resource acquisition; it renamed the organization the National Resources Commission (NRC).
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The NRC's mission was to develop and manage all the nation's basic industries, mines, and other enterprises.
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Between 1937 and 1944, it grew from twenty-three industrial and mining units and fewer than two thousand staff members to more than one hundred manufacturing, mining, and electrical enterprises and twelve thousand staff members.
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By 1944, nearly 70 percent of the total capital of public and private enterprises belonged to state-run operations, with three-quarters of the capital going to NRC operations.
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The NRC, along with other entities, also began to brainstorm postwar economic strategies to promote industry and state control.
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In 1946, the NRC released its First Five-Year Program for China's Postwar Economic Reconstruction; it included plans for agriculture and water conservation, and it divided the nation into nine economic regions. But the plan, along with others established during this time, was based on the faulty assumption that postwar China would enjoy peace and significant capital investment from the United States and Japan. It was only partly implemented as a result.
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Despite the KMT's efforts to unify the country economically, serious political challenges remained. Rampant corruption within
the KMT and the KMT's failure to undertake significant land and other reforms allowed the CCP to broaden its underground base throughout rural China and establish party cells in urban areas. Throughout the late 1930s and early 1940s, the KMT was thus forced to fight a two-front war, against the Chinese Communist Party on the one hand and the Japanese on the other. At the conclusion of World War II, compared to the CCP, the KMT possessed greater military and manpower, as well as the support of the United States. However, its troops were demoralized and riven by corruption; over the course of the following four years, the CCP amassed a string of victories, ultimately resulting in the establishment of the People's Republic of China (PRC) under CCP rule in 1949.

For both the KMT and its successor, the CCP, the postwar experience reinforced not only the value of state planning but also the need for China to rely on itself to develop its basic industrial and economic needs, including a coordinated strategy for oil, steel, electricity, machinery industries, and military arsenals. After the establishment of the People's Republic of China, the economy was tied largely to that of the Soviet Union: the PRC imported 50 percent of its oil from the Soviets and used Soviet coal-processing technology to exploit its own reserves.
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As relations with the Soviet Union deteriorated in the 1950s, however, Mao Zedong, the first chairman of the CCP, began to extol the virtues of self-reliance or
zili gengsheng
, a policy that had originated within the Communist Party during the revolutionary Yenan period (1935–1947) but claimed deep roots in Imperial China as well.
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China also adopted the Soviet strategy of five-year plans to manage economic development with quotas, targets, and timetables for all aspects of the economy, virtually eliminating the role of the market in the process. The first official five-year plan extended from 1953 to 1957 and focused primarily on increasing heavy industry and agricultural yield; in 1957 Beijing launched the Great Leap Forward, which was designed to increase production dramatically by decentralizing industry with the creation of thousands of small-scale industrial operations throughout the countryside and by moving people into large agricultural communes.
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By 1962, an estimated
twenty to forty million people had died from starvation as a result of this ill-designed and poorly executed plan.

Throughout Mao's era, Chinese rulers continued to attempt to promote their political values globally. Mao put China forward as a leader of the nonaligned movement and the developing world more broadly, competing directly with the Soviet Union. In 1954, Premier Zhou Enlai enunciated the Five Principles of Peaceful Coexistence—mutual respect for territorial integrity and sovereignty, nonaggression, noninterference in the internal affairs of others, equality, and mutual benefit—as a means of establishing China's peaceful international intentions. And even though it was desperately poor itself, the nation reached out to the developing world as a provider of assistance. With its 1964 eight principles of foreign aid, China promised to train locals to use any technology the PRC exported, provide high-quality equipment and materials, and ensure that Chinese aid helped countries become self-reliant.
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In the middle to late 1960s, however, China transformed its foreign policy, abandoning developing-country regimes that it had formerly supported in favor of abetting national liberation movements in these same countries. China provided military and financial support to revolutionary movements throughout Asia and Africa, in places such as Angola, Indonesia, and Mozambique, with the result that the governments of many of these countries broke off their relations with China.

Nonetheless, trade between China and the developing world overall boomed. Between 1955 and 1965, Sino-African trade increased nearly sevenfold, and China entered into relations with fourteen newly established African states.
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But the most significant trading partners were in its backyard; throughout the late 1960s and 1970s, trade with Japan, countries in Southeast Asia, and Hong Kong increased on average 25 percent annually. Chinese exports shifted from primary commodities to manufactured goods, and imports were dominated by producer goods, such as petroleum refinery installations, production plants, and—portentously—raw materials.
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After the PRC was admitted to the United Nations in 1971—which led to the establishment of official relations with many more countries than before—it began to trade with the United States and
more broadly within the global economy. Chinese foreign trade overall grew at an average annual rate of more than 20 percent; by 1979, Chinese foreign trade had increased nearly ten times over that of 1950, and the gross domestic product (GDP) growth rate had jumped from close to 0 percent to 7 percent annually (although many believe this figure to be exaggerated).
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Despite the rapid growth in foreign trade through the 1960s and 1970s, it was not until the 1976 death of Mao Zedong and the consolidation of power by Deng Xiaoping in 1978 that China began to transform into a modern economy. The Four Modernizations (agriculture, industry, national defense, and science and technology)—proposed as early as 1963 but never realized—became the development platform for China's leaders to bring the country's economic, military, and technological capabilities up to world standards. To accomplish this economic modernization, Deng adopted a series of reforms, including welcoming foreign investment (capital, technology, and managerial skills) through a system of special economic zones (SEZs) in selected coastal provinces; gradually introducing market forces into the state-run economy by allowing enterprises—once they had met their state-set quotas—to sell their surplus on the market; opening the door to small-scale private entrepreneurs; and dismantling the system of communes in favor of a household responsibility system that allowed farmers to plant their own side crops, primarily fruits and vegetables, and sell their produce on the open market once they had met their government quota. These reforms ushered in more than a quarter-century of double-digit Chinese economic growth.

Yet as we will see, even as these changes transformed China's resource predicament, long-held traditions have continued to influence Chinese resource strategy. The state continues to play a dominant role in guiding resource investment and pricing. And concern over resource security remains a central focus of Chinese decision makers.

IN THE 1980S, DENG XIAOPING'S
reforms quickly led to rapid economic growth, and with that, surging demand for natural resources. Chinese leaders attempted to boost domestic natural resource production, in order to forestall the need to rely on imports. Their most heroic efforts, which betrayed an intense desire to avoid imports, centered on grain.

Grain security, a core concern of Chinese leaders through the centuries, gained special salience in the mid-1990s with the publication of the American environmentalist Lester Brown's 1994 article “Who Will Feed China?”
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Chinese leaders were already primed to worry about food prices: many blamed the Tiananmen Square protests in 1989 in part on the rising cost of food the year before.
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Brown took things a step further, arguing that declining grain production and rising demand for food in China would produce not only soaring grain imports into China but also dramatic increases in the price of food worldwide. Brown's argument appeared to be partly validated when Chinese grain consumption did, in fact, rise steeply. The article ignited a political firestorm in China, underscoring deeply ingrained concerns about the country's ability to feed itself. In early 1995, Xie Zhenhua, then director of the National Environmental Protection Agency, responded. “Who will feed China?” he asked rhetorically. “The Chinese people will feed themselves.”
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It was not to be. In the years that followed, Chinese food consumption rose steadily, and diets shifted to include more meat,
boosting demand not just for foodstuffs but also for animal feed. In response, the Chinese government issued White Papers, adjusted regulations, and pushed new technology onto farmers. It even succeeded in avoiding large-scale grain imports. But China was increasingly trapped in a zero-sum game: as it steered land toward grain, it was forced to cut back on other basic food production. The inevitable result was increasing reliance on imported food and feed.

Agriculture was far from an isolated case: for resource after resource, Chinese consumption boomed, and imports rose. Between 1980 and 2010, oil and coal consumption both doubled roughly every dozen years.
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Natural gas use took longer to accelerate, but between 1995 and 2010 it doubled roughly every five years.
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From 2000 to 2010, copper use more than tripled; steel production quintupled, driving demand for its main ingredient, iron ore; and aluminum production rose even more rapidly, spurring surging demand for bauxite and alumina (the raw and semiprocessed materials, respectively, from which aluminum is made) in the process.
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Meanwhile, between 1980 and 2010, electricity use doubled roughly every eight years, with hydroelectricity and coal both contributing strongly.

In the face of growing demand for resources, Chinese leaders attempted to boost domestic resource production across the board. It quickly became clear, though, that this would be insufficient to meet domestic demand. The old China might have put self-sufficiency ahead of growth and avoided imports even to the detriment of domestic economic development. But the surge in economic growth was itself the product of an increasingly liberal and open approach to economic management. Chinese leaders were pragmatic. In its 2003 White Paper on mineral resources (the leadership often uses White Papers to set and communicate major policy thrusts), Beijing claimed that “China will depend mainly on the exploitation of its own mineral resources to guarantee the needs of its modernization program.” But it had to admit this wasn't enough: “At the same time, ” the White Paper declared, “it is an important government policy to…make use of foreign
markets and foreign mineral resources.”
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The Chinese leadership was blunt: “There is a fairly large gap between the supply and demand in oil, high-grade iron, high-grade copper, fine-quality bauxite….We shall open still wider to the outside world.”
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