Environmental economics is a branch of economics that deals with the study of issues that pertain to the environment. It thus covers issues such as the effects of environmental policies on issues like features that involve air, water, harmful substances, and wastes among other environmental features. The study of environmental economics covers in general terms inefficiencies in resource allocation.
In this paper I seek to discuss the Chinese demand for commodities and the effects of the demands on the world economy as well as the effects of these demands on the sustainability of the commodities. I will examine the trend of Chinese demand on commodities such as copper, glass, cement and oil. I will also shade some light on the trend in the global economy due to this demand and the impacts of these demands on the sustainability of these commodities.
I have three major sections in this paper: Chinese demand for commodities, the impact of the China’s increasing demand and the effects brought about by this ever increasing demand. The commodities that I specifically addressed in this paper are oil, cement, copper and glass.
Chinese demand for commodities
I will start by addressing the demand for oil and then cement, copper and glass in that order. The dominance of china in demand for commodities in the global market is significantly reflected in the oil market. The Chinese demand for oil is again realized to be different to that of other countries.
While the demand for petroleum products in other countries can be explained and their future trends determined, that of china has left experts perplexed. The issue is that the rate at which the Chinese demand for oil is increasing is high and its trend is not forecasted to stop in the near future. Analysts have equivalently pointed out that unreliability of data as revealed by the Chinese government agencies also poses threats to understanding the country’s trends in a perfect manner.
The drivers to the Chinese increasing demand for oil are basically internal features that range from the country’s economic expansion to its population structure. The changing population trend of the country has for example been characterized by a shift of the country’s population from rural based to an urbanized population. This has equally been accompanied by a change in the type of energy used by the people of china which has heavily shifted to dependence on oil for energy.
The change in the population structure to an urban dominated form has also been resulting in changes in lifestyles with an observed increase in the number of motor vehicles being purchased and used by the urban dominated population. The increased ownership and usage of motor vehicles has therefore also caused increased demand for oil by china.
Other factors such as increasing income of the Chinese population as well as the country’s expanding economy have also been factors behind the increased demand for oil by the people’s republic of china (Congressional 12).
The trend in consumption of oil by china has equally been on an increasing scale. The country, for example, had its demand for the commodity increase to the level that china became the second largest oil consumer in the world by the year 2004. It was by then following the United States in terms of demand for oil.
A consideration of the Chinese demand for oil in a span of two and a half decades, starting from the year 1980 up to the year 2005, reveals an almost perfect trend in the increasing demand for oil by the country. On a scale of a million barrels per day, china recorded a demand of below two in the year 1980.
The demand was then recorded to steadily rise with a slight difference in the late 1980s when the trend was shaken with a slight decrease in demand. The oil consumption, however, then immediately resumed its rising trend that remained uniform for the remaining considered period up to the year 2005.
By the year 2005, china had recorded about seven million barrels of oil as its daily consumption. It is also important to note that the Chinese consumption of oil surpasses its production. The country’s consumption and production of the commodity was at its equilibrium sometimes in the earlier years of 1990s but the increasing trend of the country’s demand then surpassed its supply. By the year 2005, China’s demand for oil was rated at about seven million barrels a day while its production of the same product was reported at slightly more than three million barrels per day.
This means that by the year 2005, the country was heavily relying on imported oil with more than half of its consumption being supplied from the international oil market. The trend of growth is projected to continue in future. The Chinese demand for oil can therefore be generalized to be on an increasing trend (Congressional 15).
Next after oil, I move to examine China’s demand for cement. The demand for cement in china has equally experienced an increasing trend as time has progressed. The product has as well experienced an increased growth in its demand with growth rates that range from about eight percent to about twenty percent on measured scale.
Though the trend of growth is not specifically steady, its fluctuation is on an increasing general trend. The fluctuating increasing trend was for example realized with a growth rate of about eight percent in the year 2005 and a rate of almost twenty percent in the year 2003 (Shenzhen 256).
The demand for cement is also identified to be on the increase in global terms. This global demand was, for example, reported to have hit an above two billion ton mark in the year 2004. According to Tradesship publications, the global trend in the demand for cement, for example, recorded trends such as six percent in the period ranging from the year 2000 to the year 2002 and an almost nine percent in the period between the years 2002 and 2004.
The trend was expected to be on the rise in subsequent years. A significant amount of this global demand for cement is, however, attributed to China. A massive economic development of the country has caused the country’s demand for the product and this demand, which has reported an increasing trend, is further expected to keep on increasing. The percentage composition of Chinese demand for the commodity with respect to the global demand indicates a significant portion of the global cement being consumed by the country. This percentage of Chinese consumption, relative to the global consumption also indicates a trend of growth.
A consideration for example reveals that china commanded about thirty six percent of the global cement consumption in the year 2002. This consumption was further pushed up in the year 2004 to reach an almost forty percent mark. Statistics revealing percentage consumption of cement by countries revealed the extent to which China dominates the global cement market; consuming close to forty percent of the world’s produced cement.
In the year 2004 for example, Chinese demand for cement was recorded at nine hundred and sixty three metric tons while the next mass consumer of the same product in the world was India which commanded a relatively lower value of about one hundred and twenty five percent.
It is also notable that as other countries that have been identified as top consumers for cement such as the United States, India and Japan have over time been characterized with a fluctuating trend with occasional increase and decrease in the demand for the commodity, trend of demand for the product in china was purely characterized by increasing quantity.
The only fluctuation in the Chinese demand for the commodity has been the rate at which its demand is growing. This means the demand for the good by China has most likely been increasing since the statistics and has a high probability of further increase in future (Tradeship publications 8).
Another product that China highly requires is copper. Following its growing economy together with its high population and technological evolution, China has become a center for economic activities. Intense production of different commodities which have immediate impacts on demand for raw materials as well as the need for market for finished products has as well made the country an important player in the international market.
Copper as a raw material for manufacturing processes in China has led to significant demand for the metal in the country. Moments of increasing demand for copper in China has for example been recorded in subsequent years after the year 2000. The demand for copper by the country is so significant to the global copper market such that china alone has an impact in the market mechanism of copper in its international market (Yusuf & Nabeshima 32). China has been rated as the world’s largest consumer of copper.
The trend of the Chinese demand for the metal has similarly been on the increase since the year 2000. A trend that was realized between the years 2000 and 2003 was continued to subsequent years with a drastic increase in the year 2006 to reach a level of almost four million tons of demand for the metal.
A projection into the global demand for the commodity identified China as the world’s largest consumer of the metal. The Chinese demand was actually identified to be greater than that of the combined demand for the same commodity by a combination of western European countries which had a joint copper demand at about twenty one percent (Tinghino 12).
Glass has proved to be quite significant for the development of the economy of China. The demand for glass is similarly identified to experience an increasing trend over the past time period. A statistical review as published in the year 2007 projected a steady growth in the demand for glass by China.
A group that was identified as Freedonia reported that the demand for flat glass by the country was, for example, to experience a stable increment of close to nine percent per year in the five years prior to the year 2007. If the trend is to persist, the Chinese demand for the product is expected to overtake any other demand for the commodity in the whole world. This means that China is expected to be the world’s largest consumer of glass.
The demand for the product in china is majorly fuelled by the country’s construction industry that utilizes the product as well as the motor vehicle industry (Mukerji 1). The development and expansion of Chinese industries has had a significant impact in its demand for glass. This has led to a higher demand for the product into the Chinese domestic market (Kogel et al. 766).
Impacts of China’s increasing commodity demand on the world’s economy
The increasing demand for oil by china has a variety of impacts on the global economy. The increasing demand for oil by china which is significantly felt in the world’s market for crude oil has greatly affected the market mechanism of crude oil.
This is primarily because the amount of oil that China imports is quite significant as compared to the global production quantity of the product. Following the market forces of demand and supply, the Chinese increasing level of demand for oil has led to increasing pressure on the market imposing increasing global prices for crude oil.
The impact of this increased price for crude oil means increased rates for the products of crude oil such as kerosene and gasoline among others. These being the main sources of energy in a majority of country based economies means increased costs of production processes which are then transferred to consumers in terms of consumer commodity prices. The overall result in the global economy is therefore increased costs of commodity which translates to high living standards in economies (Congressional 37).
Increased oil prices, following the increased global demand to which China greatly contributes, is also expected to impact global economies especially in developing countries that import oil. These countries are normally forced to adjust their economies in order to balance their international trade.
The result is occasionally a reduced level of importation which further pushes prices upwards. Eventually, strained economies are realized with increased costs of productions together with high costs of goods. Characteristic reduced profitability of oil dependent factories, their closure or streamlined employment of human resource leads to unemployment in economies (World Bank 3).
Following the demand pulled prices of oil in the international market which is due to the increased global demand for oil significantly caused by China’s increasing demand for oil, a number of impacts have been reflected in the global economy. One of such impacts is an increased flow of money from countries that import oil to those countries that produce oil.
The increased monetary exchange is in response to the direct increased price of the commodity. Since the increased price is effected in the global market, and the importing country have no alternative in the form of source of energy, they are forced to spend in the costly importation.
The increased global oil price has also been characterized with general high commodity prices together with a significant inflation in world economies. The increased prices are normally felt in industrial production processes which then call for measures by players in industrial economies in order to maintain their profitability.
Strained economies which are characterized by closure of industries and companies together with increased unemployment rates and high living costs are therefore the overall impacts of the Chinese increasing demand for oil (International 1).
The increased global demand for copper which is also attributable to the increasing demand from China has also impacted the world’s economy. The increasing demand for copper by china has for example led to explorations into possible supply of the commodity from the international market.
China has for this reason explored countries in Africa and the Latin America in order to source for its raw material, copper. This has led to established or developed mining in copper rich countries in these regions following incentive from Chinese investors.
The Chinese demand for copper, for example, led to the country’s interest in Zambia which led to massive investments in the country thereby improving the Zambia’s economy (Dijk 93). The country’s increased demand has also resulted in availability of market for copper in the Latin American region (Santiso 63). The increased demand for commodities such as glass and cement has also contributed to increased market in the producing countries thereby improving the countries’ economies (Zafar 108).
Effects of Chinese demand for commodities’ sustainability
The globally increasing demand for commodities which is majorly fuelled by the effects of the Chinese expanding economy has an impact of resource overexploitation. This has a threat of increasing the rate of depletion of these resources. Most of the resources such as oil, copper, glass among others are non-renewable and their induced extinction due to overexploitation will mean future scarcity of the commodities. The increased demand of commodities by China therefore poses a threat to sustainability of these resources (Rao 43).
China has been undergoing an expansion in its economy that has led to its increased demand of commodities in the global market. The Chinese increased demand has similarly been significant in the world’s economy with negative impacts on scarce resources like oil and positive impacts on relatively abundant resources such as copper that have not been fully explored. The increased demand, however, threatens the existence of these resources.
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