China’s Indirect Resource Grab

Here is anther note from Andy Lees of UBS this morning, this time regarding the intra-Asian competition for natural resources with China as the lead actor. Andy writes (links added):

You will have seen this morning Vietnam’s state media warning that low seasonal floods through Vietnam’s Mekong Delta threaten to raise costs and cut output of the upcoming winter rice crop. 600,000 hectares (1.48m acres) of rice in upstream provinces of the delta are affected, or nearly 38% of the region’s total. The Mekong Delta supplies 90% of the rice shipped abroad by Vietnam, the world’s second largest exporter after Thailand. It  warns that the low flood waters means the soil is less fertile, and there are more costs in reducing salinisation.

China has said that its hydro dams are not restricting water, but even if that is the case, the reduced flooding is negatively affecting nutrient distribution and increasing salinisation such that more fertilizers and more water is required. Secondly you will recall from mid last year that Vietnam was running out of sand. Vietnam exports sand to Singapore’s construction industry, but due to China’s daming of the Mekong, there is less sediment and sand being deposited. Effectively China has undermined two industries by taking the natural energy of the river from Vietnam.

Andy also mentions China’s damming of the Brahmaputra to make a new hydro station, about twice the size of the Three Gorges and far and away the world’s largest. Originally, China had denied it was building this dam (see here). Lees says the now public plans show that China will use the power generated in order to transport water inland from Tibet to the north. Nevertheless, China is now assuring India that it won’t take the water, simply the power. Right. We saw what happened in Vietnam. You can see the same occurring here as well.

Andy says that:

What it does mean however is that the natural nutrient distribution will fall needing fertilizers to compensate, salinisation will rise needing more water to compensate, oxygenation of the river will collapse reducing fish, and with reduced deposits into the sea, salt water intrusion will gradually make previously fertile land infertile. Given that this is the second largest river system in India and is hugely important for agricultural production of the second largest population in the world, this is a huge issue and is going to cause a lot of hostility – (it will also cause food prices to continue rising).

The real issue here is that emerging markets in Asia are now increasing their wealth and this has meant an increased need for natural resources – not just oil and gas but water, coal, steel and land for agricultural production. China is now the world’s largest energy consumer, having just passed the United States. As China grows its need for energy will come into conflict with the west in a competition for dwindling sources. However, these two examples demonstrate that the problem of natural resources will be even more conflict-ridden within Asia as countries compete over the benefits of shared resources.

Also see: Brahmaputra River – Wikipedia