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Q: How long did you research and report your book?
A: It took me about three years. I did probably 80 interviews with hedge funds, policy makers. Of those, probably 30 interviews were with Chinese officials. I spend about 80 per cent of my time in developing markets. I’m in Africa once a quarter and China two or three times a year. So over the course of writing the book, I probably spend three or four months in China. I felt like I had a good connection with people. I’ve seen Chinese mines, been on their oil rigs.
Q: China’s Prime Minister Wen Jiabao has said that without reforms China could face another Cultural Revolution. It’s very strong language from such as prominent leader. Did you get a sense from your time in China of what kind of opposition the government faces?
A: Not in the way you or I think about it, but there’s been a lot of transformation in China’s political system while we haven’t been watching. We are all sort of hyper-focused on issues like: are they going to have democratic elections where every Chinese stands in a line, queues around the block and elects a president? While we’ve been focused on that, there have been a whole lot of reforms going on.
One smaller obvious one is freedom of movement. And if you go to the very basic lower levels of villages and towns, they have elections. I think the opposition the policy makers feel is economic, not political. They are under immense pressure to deliver economic growth and reduce poverty as quickly as possible. I certainly didn’t feel there was any imminent political crisis.
Q: We’ve read about China’s appetite for raw materials and how the world’s supply of commodities can’t keep up to demand. What’s one new angle on that argument we’ll find in your book?
A: There are three parts to the Chinese approach. It’s very symbiotic. It tends to be painted that they have a voracious appetite and they are screwing the host. I don’t think that’s the case at all. In most countries in emerging markets where they are dominating the resource rush, they are very welcomed and liked. Of course you will still find skirmishes here and there.
Another issue I touch on is the zero cost of capital. People are right to be concerned. The Chinese will throw any amount of money to secure the resource. And the final idea is they have become the key price-setter for resources. We’re seeing it already in copper and coal. They are the go-to buyer. Whatever they say and do influences the prices of commodities.
Q: What’s the ripple effect of this? You talk in your book about price of oil and gave a recent example when the in-ground price of oil was $11 a barrel and China was willing to pay $36. What happens when they are the price-setter? What’s the impact on consumers and western manufacturers?
A: It puts them out of the game. A South Korean minister recently advised Korean companies: “Whenever you even smell that the Chinese are trying to get a contract, don’t bother competing. It’s a waste of time.” It sounds flippant, but the Chinese do have the ability to go where no one else can go.
For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/news/world/article/1232250–q-a-with-anti-bono-zambian-economist-dambisa-moyo