Winner Take All

China's Race for Resources and What It Means for the World


By Dambisa Moyo

Formats and Prices





  1. ebook $11.99
  2. Trade Paperback $16.99

This item is a preorder. Your payment method will be charged immediately, and the product is expected to ship on or around June 5, 2012. This date is subject to change due to shipping delays beyond our control.

Commodities permeate virtually every aspect of modern daily living, but for all their importance — their breadth, their depth, their intricacies, and their central role in daily life — few people who are not economists or traders know how commodity markets work. Almost every day, newspaper headlines and media commentators scream warnings of impending doom — shortages of arable land, clashes over water, and political conflict as global demand for fossil fuels outstrips supply. The picture is bleak, but our grasp of the details and the macro shifts in commodities markets remain blurry.

Winner Take All is about the commodity dynamics that the world will face over the next several decades. In particular, it is about the implications of China’s rush for resources across all regions of the world. The scale of China’s resource campaign for hard commodities (metals and minerals) and soft commodities (timber and food) is among the largest in history. To be sure, China is not the first country to launch a global crusade to secure resources. From Britain’s transcontinental operations dating back to the end of the 16th century, to the rise of modern European and American transnational corporations between the mid 1860’s and 1870’s, the industrial revolution that powered these economies created a voracious demand for raw materials and created the need to go far beyond their native countries.

So too is China’s resource rush today. Although still in its early stages, already the breadth of China’s operation is awesome, and seemingly unstoppable. China’s global charge for commodities is a story of China’s quest to secure its claims on resource assets, and to guarantee the flow of inputs needed to continue to drive economic development. Moyo, an expert in global commodities markets, explains the implications of China’s resource grab in a world of diminishing resources.


List of Tables
Table 1.1 . The weight and value of metal in US cell phones, 2005
Table 2.1 . Arable land by region
Table 2.2 . Arable land: Top-ten countries
Table 2.3 . Water pooled by region
Table 2.4 . Water pooled by country, top ten
Table 2.5 . The amount of water needed to power one US home for one month
Table 3.1 . The top-ten oil fields of the future
Table 3.2 . Sourcing copper globally (percentage)
Table 4.1 . China's loans for oil and gas since January 2009
Table 5.1 Future global commodity imbalances (for 2020)
Table 8.1 . Fact, not fiction: Chinese labor in Africa
Table 9.1 . The shale gas revolution: The top-twelve hot spots
Table 9.2 . Who is using nuclear energy? The top-fifteen countries
Table 10.1 . Civil wars linked to resource wealth between 1990 and 2000
Table 10.2 . Violent conflicts fueled by exploitation of natural resources

How the West Was Lost
Dead Aid

"If we shrink from the hard contests where men must win at
hazard of their lives and at the risk of all they hold dear,
then the bolder and stronger peoples will pass us by and
will win for themselves the domination of the world."
"The Strenuous Life," 1899
"Always pray that your opposition be wicked.
In wickedness there is a strong strain toward rationality . . .
If good intentions are combined with stupidity,
it is impossible to outthink them."
Nine Laws for the Disillusionment of the True Liberal, 1970

IN THE SUMMER OF 2007 a Chinese company bought a mountain in Peru. More specifically, it bought the mineral rights to mine the resources contained in it. At fifteen thousand feet (forty-six hundred meters), Mount Toromocho is an imposing landmass—more than half the height of Mount Everest. It contains two billion tons of copper, one of the largest single copper deposits in the world. For a hefty fee of US$3 billion, Mount Toromocho's title transferred from the Peruvian people to the hands of the Chinese.
China's commodity campaign is breathtaking. In just over a decade China has risen from relative insignificance to pole position in underwriting numerous resource-related transactions across the globe. China's Chinalco, the company that bought the rights to exploit the Peruvian mountain, also spent nearly US$13 billion in 2008 for a stake in Australia's aluminum sector.1 In June 2009 Sinopec—a leading Chinese petrochemical company—purchased Addax Petroleum, which has sizeable assets in Iraq and Nigeria, for US$7.2 billion. Sinopec also bought a 40 percent stake in the Brazilian arm of Rep-sol, a Spanish energy company, for US$7 billion in October 2010 and part ownership in a joint-venture oil company with Russia's Rosneft (a leading oil and gas company) for US$3.5 billion in June 2006.
Collectively, these inputs used to produce goods and services are known as commodities, and commodities permeate every aspect of modern daily living: the energy that powers cars, trucks, and electricity grids; water for the sustenance of all life forms; arable land that yields grains and other foodstuffs; and a long list of minerals used in everything from mobile telephony to television screens and as inputs to all sorts of machinery.
Little wonder that headline writers and media commentators telegraph warnings of impending doom in the commodity space—conflicts spurred by shortages of arable land, clashes over water, and the risks of political Armageddon as global demand for energy outstrips supply. Yet for all the importance of commodities and the markets in which they trade, our knowledge of this essential component of the global economy—the largest asset class in the world—remains blurry at best.
Winner Take All explores the commodity dynamics that the world will face over the next several decades that almost certainly will be characterized by global tensions arising from greater resource scarcity. More specifically, it is about the mechanics and implications of China's rush for resources across all regions of the world. Of all the world's great powers, only one, China, has focused its economic and political strategy on anticipating the considerable challenges presented by a resource-scarce future. But more than this, Winner Take All is a clarion call to the rest of the world, which remains largely ill prepared for the challenges of resource scarcity and the evolving dynamics around China's central role. This despite the well-reasoned arguments laid out by one of the world's foremost and renowned commodities experts, Jim Rogers, on the importance of resources in his book, Hot Commodities, nearly a decade ago.
What is at stake? At a minimum, acute resource scarcity will lead the world into a period when the average prices for commodities—arable land, water, minerals, and oil—will skyrocket to permanently higher levels. Food at supermarkets (bread from wheat and grains as well as sugar, meat, milk, etc.), water from taps, mobile phones and cars, gasoline at the pumps, and many of the other daily costs of life will be substantially higher. And higher prices will, inevitably, lead to worsening living standards across the world.
In the extreme case, as resource scarcity becomes more biting, commodity shortages could lead to outright war. As we discuss later, since 1990 at least eighteen violent conflicts around the world—many of them ongoing—have had their origins in resource shortages and access. Beyond this, numerous other countries in commodity-scarce regions, such as the water-scarce Middle East or parts of Asia with relatively little arable land per person, are vulnerable to violence and clashes. Here and elsewhere populations inhabit a delicate balance between substantial demand and supply shortages. The looming risk, of course, is that many more countries—and thus many more people—will be drawn into the fray.
This is the context in which China's resource campaign is taking place. China's global charge for hard commodities (metals and minerals that are mined or extracted), soft ones (typically grown goods, such as timber, grains, and other foodstuffs), and the infrastructure (roads, ports, and railways) that support and facilitate their extraction and delivery, is meant to guarantee the continuation of its already remarkable story of economic development. To that end, the Chinese appear determined to pull all available levers, and because China's resource undertaking is global and among the most aggressive in history, it has economic consequences for us all.
THIS BOOK TACKLES three broad themes.
First, it examines the economic implications of China's ascendancy as the lead buyer of the world's resources, set in the context of global commodity supply and demand. China is now the main trading partner of many of the most influential economies in both the developed and the developing world. In just a few short decades it has become the most sought-after source of capital infusions. Indeed, rich countries and poor alike do not just wait for China to come calling; they actively court and seek out Chinese investments.
China now funds foreign governments (providing loans and buying their bonds), underwrites schools and hospitals, and pays for infrastructure projects such as roads and railways (particularly across the poorest parts of the world), catering to the needs of the host nations and making China an altogether more attractive investor than international bodies such as the World Bank, which often tie loans to harsh policy restrictions. China's economic influence on places as far-flung as the United States, Africa, Eastern Europe, Australia, and South America is incalculable. China's increasing global influence has mirrored its economic rise and, invariably, a concomitant rise in its demand for resources.
Second, this book is about China's growing financial reach and its implications for the workings of the global commodity markets. Over time and across the gamut of commodities (minerals and oil markets and even non–publicly traded assets such as land), China has become the marginal buyer, purchasing global resources in such disproportionate volume that it increasingly has price-setting power, which automatically influences how markets trade as well as helping determine the value of assets in host countries. Thus, gleaning the ramifications of China's involvement in setting resource prices and influencing whether market prices move up or down is crucial.
Finally, this book is about the social and political implications of China's quest for resources. China's role in the world cannot be viewed solely through the narrow prism of economics and finance. Its global campaign not only has serious consequences on geopolitics but also determines how people across the globe live and interact with their governments. China's investments can have a largely positive impact when they help raise per capita incomes and reduce poverty in the host nation, but this newfound wealth can also accrue to despotic governments who use the cash for self-aggrandizement or subjugating the local citizenry. Although the Chinese may not explicitly aim to undermine a host country's political environment, they (as other foreign investors) must carefully balance the benefits of resource investment—creating jobs and laying down infrastructure in countries where such investments are desperately needed—against such political costs.
CHINA IS, OF COURSE, not the first country to launch a global quest for resources. Historical parallels can be seen as far back as the classical Roman campaigns of the first century, in Britain's transcontinental operations at the end of the sixteenth century, and in the rise of modern European and American transnational corporations between the mid-1860s and 1870s. The Industrial Revolution that powered these economies created a voracious demand for raw materials and the need to seek resources far beyond their borders. The European colonization of Africa and the later partitioning of the oil-rich Middle East were both, in essence, commodity grabs. As impressive as its resource campaign is, China appears to aspire to nothing quite so directly territorial. But China does have two tools in its favor that earlier commodity seekers often lacked, at least in similar quantity: vast wealth and vast economic and political discipline.
In a world where cash is king, China's much-noted cash stockpile—over US$3 trillion in foreign currency reserves in 2012—affords it the ability to do what other countries can't do and go where other countries can't go. Simply put, the Chinese are on a global shopping spree. And its voracious commodity appetite is unlikely to abate significantly even if China's economic growth rates were to cool.
Poor countries such as Peru think nothing of mortgaging and selling off their assets, even when those assets come in the form of a fifteen thousand–foot mountain of copper, as they badly need the money to finance economic growth and development. Meanwhile, heavily indebted industrialized countries that need to raise revenues also capitulate, borrowing significant sums from China. In 2011, for example, China was the largest single holder of US government debt, with 26 percent of all foreign-held US Treasury securities (around 8 percent of total US public debt). Increasingly, countries like Japan, South Korea, and others across the Middle East have embarked on their own commodity campaigns—particularly with regard to Africa's arable land—but China's size, cash (i.e., its ability to outbid the competition), and unyielding determination mean, for now, it's mostly all about China.
But who is China? Is it right to combine all of China's parts into one monolithic entity? And is the sum always greater than the constituent parts? China's success relies on many different agents— individuals, corporations, and the Communist Party state. But ultimately they all pull together—public or private—under one unifying force with a single agenda: the betterment of China.
This philosophy is perhaps best encapsulated in China's "peaceful rise" policy line, popularized in numerous speeches between 1997 and 2004 by Zheng Bijian, a foreign policy spokesman.2 These speeches, along with the Government Work Report (similar to the US president's State of the Union address) delivered annually by the Chinese premier, have laid out the leadership's strategic aims for the country. From economic growth targets to technology strategy to foreign policy and statements about China's role in the world, these articulations do a good job of stressing the aspirations of China's political class and the important factors integral to development, mainly public goods such as education, health care, and domestic infrastructure.
In principle there is little to distinguish many of these goals from those of other governments. In China's case, however, it's less about these relatively uncontroversial proclamations and more about how China's political infrastructure goes about executing China's agenda. Through a centrally planned command-and-control system of the economy, China's Communist Party sponsors and influences the behavior of mammoth state-owned enterprises such as banks, energy firms, transport and logistic businesses, and resource companies. More generally, the Chinese state's subscription to state-led capitalism (where the government takes a central role in driving profit-making, commercial activities) means that all actors are primarily focused on meeting the goals of the Communist Party, so that even the blind profit-making motives of Chinese businessmen fall behind the Politburo's political desires.
So how does the Chinese government ensure that its philosophy of national purpose prevails? It uses regulation, money, and personnel.
The regulatory process is pretty straightforward. Like other governments around the world, the Chinese government provides the strictures to set up businesses in the form of investment codes, licensing rules, and business-operating guidelines under which individuals and corporations must operate. The business environment is monitored through a web of regulatory bodies such as its central bank and agencies that grant consents or permissions for businesses to operate, among them the State Administration for Industry and Commerce and the Quality and Technology Supervision Bureau.3 But more than this, the important issue is the reach of the government—how long, exactly, the long arm of the law is. In China's case it's pretty clear that "regulation" goes much further than simply issuing permits and authorizing licenses for businesses to operate.
The Chinese party state also enforces its philosophy of national purpose through money—by controlling the allocation of its vast public funds, including China's foreign reserves. The allocation of China's public purse is guided by at least two factors. First, public proclamations on economic policy imperatives such as those contained in the Government Work Report discussed above as well as statements aimed at those sectors and industries (e.g., food production and energy) feed into China's overarching plans to continue to drive economic growth and reduce poverty. It is high and sustainable growth rates, as well as a continual reduction in poverty, that, above all else, drive the Chinese state actions. Second, China's cash disbursements are influenced by broader market conditions that may warrant that the state step in to boost lackluster economic growth or intervene in times of economic crisis. In November 2008, for example, the government implemented a US$586 billion (around 4 trillion renminbi) stimulus package to combat the ill effects of the financial crisis (rising unemployment led by the shrinking export industry and, thus, a slowdown in economic growth) in a matter of days. China's stimulus package amounted to nearly 15 percent of annual economic output spread over two years.4
The government makes its financial muscle felt, so the line between public and private can appear deliberately obfuscated: for example, the Chinese state retains sizeable equity stakes in many publicly traded companies (in some cases upward of 70 percent of these companies are government owned) and virtually all of the top thirty Chinese multinational enterprises are state owned. Often Chinese enterprises investing in strategic sectors such as oil, minerals, or infrastructure are state owned, and thus, in a sense, they act as extensions of the party state. This structure has been central to China's global resource drive. For instance, the three leading investors in Africa are state-owned oil companies: China Petrochemical Corporation, China National Petroleum Corporation, and China National Offshore Oil Corporation.
China's so-called going-out strategy uses state-controlled tools to encourage overseas expansion and acquisitions by even privately held companies. Many Chinese enterprises receive government grants or (low-interest) loans from state-owned banks, placing them at a distinct advantage compared with foreign companies that have to source funds with more expensive borrowing from the financial markets. Numerous Chinese companies benefit not only from concessional credit lines (i.e., credit lines that provide flexible or lenient terms for repayment, generally with extended repayment periods and at lower interest rates than market rates) but also from tax breaks and priority allocation of key contracts. In 2009, for example, Wuhan Iron and Steel, China's third-largest steelmaker, was extended a nearly US$12 billion line of credit by the state-owned China Development Bank. A primary goal of the loan was to finance its "overseas resource base construction," including the roll-out of large iron mines and steel plants that would produce these commodities. Such loans became common as the Chinese government encouraged state-owned banks to lend in order to stimulate the economy in the wake of the 2008 financial crisis.
Finally, China's control is about people and personnel. Roughly 10 percent—nearly eighty million people, and growing—of China's workforce are card-carrying Communist Party members. It's not just the number of party cadres that matters but that party members are almost always strategically placed to ensure that all sectors are infused with the Communist Party's overarching national purpose. It's not unusual for publicly traded enterprises to "employ" party cadres to such an extent that these party representatives are seen as more important, more powerful, and more influential than the CEOs of those nominally independent entities.
In extreme cases companies'senior staff is appointed by the Chinese government and chief executives hold ministerial level rank. And despite being operationally independent, companies are regularly seen to conform and adhere to the Communist Party policy. From the vantage point of the companies, their relationship with the government is a balancing act between the benefits they get, such as concessional funding and international contacts brokered by the Chinese state (e.g., contacts with senior public officials and foreign governments established by the Chinese government) and the costs of government interference and pressures of compliance with the Communist Party's worldview.
The strategy of providing China's network of companies access to (cheap) money and Chinese state endorsements as well as preferential access to foreign government contacts (who themselves are central players in the resource sector in their respective countries) seems to help steer China's developmental agenda. And because this approach works well for the Chinese government and the command-and-control approach of the Communist Party, it is unlikely to change any time soon. If anything, Chinese state interventions would likely increase were the economy to face a "hard landing" that would see a considerable contraction in China's economic growth, as some economists were predicting in 2012.
To many Sinophiles the Chinese government is omnipresent and omnipotent. However, the degree of government influence, one Chinese businessperson quipped, depends on the extent to which you are licensed, take public money, and who you have as (and, relatedly, who selects) your key personnel—such as the CEO, board members, or the chief financial officer. It's the difference between being told explicitly what you should do, where to invest, who to hire, and so on (if you take the license, the money, and the people) versus being told what you should not do—for example, barring a company from investing outside an explicitly stated sector (if you only seek a license). The emergent patterns around deal financing and transactions struck in all areas of natural resources fit snugly into China's imperative for its vast domestic infrastructure build-out and plan for longer-term economic growth. This is China, Inc.—all for one, and one for all.5

China's Rush for Resources

The Drivers of World Commodity Demand
TO UNDERSTAND THE EVENTS of the next fifty years one must first and foremost understand environmental scarcity or "diminishing natural resources." So penned Robert Kaplan in 1994 in his article titled "The Coming Anarchy: How Scarcity, Crime, Overpopulation, Tribalism, and Disease Are Rapidly Destroying the Social Fabric of Our Planet." Kaplan offered a chilling vision of the future, foretelling in vivid and painstaking detail how the global scarcity of resources would contribute to worldwide demographic, environmental, and societal stress.
Whether or not we accept Kaplan's dire vision, it is clear that in order to understand China's approach to securing global resources, we must set it in the broader context of the global demand for commodities. Ultimately, global commodity supply also matters (this is discussed in the next two chapters), but this chapter considers the evolving demand dynamics: why global demand pressures across the commodity complex—arable land, water, energy, and minerals—are set to increase, and how these demand factors will exacerbate resource scarcity in the decades to come.

The Malthusian Chronicles

Kaplan's article was not the first to identify a dearth of resources as the catalyst of an impending global cataclysm. As early as 1798 Thomas Malthus in his "Essay on the Principle of Population" argued that population growth generally expands in times and places of plenty, until the size of the population relative to the primary available resources causes distress. In essence, Malthus argued, the limits on the availability of commodities are what keep population growth in check. The Club of Rome's 1972 report "The Limits to Growth" built on Malthusian theory in modeling the impact of a growing world population against finite (and depleting) resource supplies. The Club's conclusion: this supply-versus-demand disequilibrium would constrain economic growth and could consign large swathes of the global population to poverty.
Four decades later commodity imbalances continue apace.
The exponential growth of the world's population and the technology that has accompanied it over the past fifty years have placed unprecedented pressures on commodity demand of all manner of resources—from food and water (itself an input to food) to energy and minerals (as, say, heating and plumbing inputs for a rapidly expanding global population). Even ten years ago few anticipated how many of us would be carrying personal technological devices or the rapidly increasing share of the global population that would be car owners, yet both are a tremendous draw on finite mineral resources.
To be sure, the world economy has largely been bailed out by technological advances that have generated productivity gains, greater efficiencies, and improved utilization of resources. But if they have delayed our day of reckoning, it's far from clear that they will do so forever. As advancements to boost resource supply stall and global commodity demand skyrockets, a scarier picture is emerging, one in which the resources on which we depend today—many of them nonrenewable—are depleting into nonexistence or are so poorly matched that their demand and supply might never be able to meet. Yet, as we highlight throughout this chapter, China seems to be the only country that's preparing for this eventuality in a sustainable and deliberately constructive way, by making friends across the globe and systematically and continually investing across the commodities complex.

Driving Resource Demand

Like virtually all goods and services, commodity prices are driven by supply and demand. As canonical economic models suggest, where these two meet, the price of the commodity is set.
As we shall discuss in subsequent chapters, the factors driving the supply of land, water, energy, and minerals are complicated by the fact that there are cross-linkages among the different resources. For example, the supply of food, such as grains and beef, crucially depends on the availability of both arable land and water. So gaining access to these underlying resources matters almost as much as the target commodity itself and ultimately determines the price and availability of the broader spectrum of food products.
In contrast, the factors influencing the demand for soft and hard commodities are broadly the same. At a very basic level the two influential factors are population dynamics (the absolute size of the world's population and prospects for global population growth) and the increases in wealth that are driven, in particular, by rapid economic growth in emerging economies. Naturally, the implications of these wealth increases on consumption patterns will be considerable.

The Global Population Grows


On Sale
Jun 5, 2012
Page Count
240 pages
Basic Books

Dambisa Moyo

About the Author

Dambisa Moyo is a prizewinning author of the New York Times bestsellers Edge of Chaos, Winner Take All, and Dead Aid, and she was named one of the “100 Most Influential People in the World” by Time magazine. Moyo regularly contributes to the Wall Street Journal and Financial Times. She lives in New York City and London.

Learn more about this author