The Southern Engines of Growth and Hard Commodity Prices: Does China Lead to Disruptive Development? 3rd China Postgraduate Network Annual Conference 8-9 th April 2010: Oxford University Masuma Farooki

The Main Issues 1.Commodities in Development 2.Commodity Prices 3.China’s Demand for Commodities 4.Optimism for Commodity Exporting Developing Countries?

Commodities In Development The Resource Curse –Deteriorating Terms of Trade –Price Volatility –Enclave Economies –Political Instability and Conflict

What’s in a Price Movement? Commodity Boom: A peak that is much higher than previous peaks. The Cycle: Short Term; a peak/trough to peak/trough measurement. The Super Cycle: Medium Term; a prolonged trend rise over a decade.

Commodity Price Movements Source: UNCTAD All Commodity Price Index Price Cycle Price Boom Super Cycle

Commodity Prices Source: UNCTAD Monthly Commodity Price Statistics

What does the Price Movement represent? Is it just a Price Boom? Is it a temporary interruption of a Super Cycle, due to the financial crisis?

To be a Super Cycle you need: Price rise over a decade or more Be driven by demand in an expanding economy

The Super Cycle Source: UNCTAD All Commodity Price Index

A Southern Driver of Growth China: The Large Country Impact –Volume of Demand –International Sourcing China: The Developing Country Impact –Resource Intensive Growth –Years to maturity

China’s Share of Global Consumption of Base Metals Base Metals ( % Share of World Demand) 1 Aluminium51333 Lead71031 Iron Ore41648 Copper71226 Source: 1 Macquarie Commodities Research (2008)

Optimism for Commodity Exporting Developing Countries?

Chinese GDP/Capita and Mineral Consumption

China’s Importance for Commodity Exporting Developing Countries ( ) % Share of Region in Chinese Imports of Base Metals Region Low and Middle Income30%46% 56% Latin America9%17%18%27% Asia6% 8%13% SSA6%9%6%5% % Share of China in Regions Exports of Base Metals Low and Middle Income2%7%11%27% Latin America1%5%9%24% Asia6%18%35%80% SSA2%10%12%26% Source: Author’s calculations from COMTRADE via WITS accessed in July 2009.

Projected Global Growth Source: IMF World Economic Outlook (January 2010)

China’s demand is expected to remain strong in the medium term. China will rely on commodity imports for its consumption. Commodity Exporting Developing Countries can benefit from this opportunity. Domestic policy will inform how these benefits are translated into development.