http://www.eia.doe.gov/emeu/cabs/Angola/Oil.html

China is working with Angola because the Civil War there ended in 2002, so it is open to Chinese companies unlike other nations that have been locked up by US companies a long, long time ago. Africa exports far more oil to the US than it does to China. You don’t hear much about that, because oil companies want to keep things quiet, and frankly most people would probably rather not know where their oil comes from.

You have to go directly to primary sources rather than only rely on summaries. If you read summaries of facts you are going to be influenced by the opinions and views of the person that wrote the summary who is going to present the facts that support his case.

Thanks for the additional info on Angola. I am just a beginner trying to figure out what is happening in Angola. I was extrapolating from the following in the Wikipedia article:

“In 2004, China’s Eximbank approved a $2 billion line of credit to Angola. The loan is being used to rebuild Angola’s infrastructure, and has also limited the influence of the International Monetary Fund in the country.

Growth is almost entirely driven by rising oil production which surpassed 1.4 million barrels (220,000 m³) per day in late-2005 and which is expected to grow to 2 million barrels (320,000 m³) per day by 2007. Control of the oil industry is consolidated in Sonangol Group, a conglomerate which is owned by the Angolan government….

“Rapidly rising production and revenues from the oil sector have been the main driving forces behind the improvements in overall economic activity – nevertheless, poverty remains widespread. Anti-corruption watchdog Transparency International rated Angola one of the 10 most corrupt countries in the world in 2005. The capital city is the most developed and the only large economic center worth mentioning in the country, however, slums called musseques, stretch for miles beyond Luanda’s former city limits.

“According to an American think tank, oil from Angola has increased so significantly that Angola now is the Chinese Communist Party’s biggest supplier of oil.

—

The author of this Wikipedia article seems to be saying that a very corrupt Angolan government, that is in hock to China, is in control of Angola’s oil industry, not Western oil companies. It also seems to be saying that much, if not most, of Angola’s oil exports are going to China, not to the west.

Angola is on the Atlantic ocean, not the Pacific. Normally, countries tend to export oil to countries that are closer in order to minimize transportation costs. Yet Angola appears to be exporting almost all of its growing supply of oil to China.

Maybe you missed the fact that China bought influence in Angola through a $2 billion line of credit. It very well could be that Angola is serving as a model for a Chinese government trying to lock up foreign resources.

Howard

It isn’t. Most of the companies that are involved in Angolan oil production are Western. China has a rather minor role in Angolan oil production and in African oil production in general.

Richman: My guess is that China is involved in some of that corruption.

When you fill up your car, you are involved in a lot of rather nasty things, that most people don’t want to think about.

Richman: I wonder if China is paying the world price for oil that it gets from Angola.

I don’t see why not. Why should a corrupt government offer discounts?

I think the following statement of yours captures China’s motivation: “Moreover, the CIC is supporting one of the strategic goal of China’s state, namely helping — in China’s view — to secure a reliable supply of the mineral resources China’s economy needs.”

China’s more or less exclusive status as the buyer of Angola’s rapidly-increasing oil production is likely the model here. I don’t know anything about what is happening in Angola, but the Wikipedia article suggests that there is lots of government corruption. My guess is that China is involved in some of that corruption. I wonder if China is paying the world price for oil that it gets from Angola.

Howard

I don’t really think so. Chinese agriculture is largely non-mechanized, which means that it’s productivity is low, but it also means that it can farmers can rapidly switch to other crops, and it makes sense for Chinese farmers to plant high-labor crops, low automation like fruits and vegetables than rice, and removal of WTO tariffs has pushed Chinese agriculture in that direction.

The revaluation will impoverish farmers idea is an argument that doesn’t much much sense to me. If I’m a pig farmer, I want cheap feed grains from Kansas.

DC: The US also needs an civilian Industrial policy like all of the Asian nations have.

I don’t think so. Also China doesn’t have much of an industrial policy. Decision making is too fragmented. I think that is a good thing.

DC: But don’t look over the shoulder, the Chinese government has established SMIC with billions in state capital to advance China’s semiconductor technology (ie. former Chinese President’s Jiang Zemin’s son is the company CEO).

Which explains precisely why industrial policy is often a bad thing. Does a company get funded if Jiang Zemin’s son isn’t the CEO? What if it is doing biotech work? What about high performance computing systems used to price derivatives? What do we do if the company that is run by Jiang Zemin’s son turns out to be totally incompetent?

As far as basic research and development, the US does fund a huge amount of research through the Defense Department and the National Science Foundation. One reason the federal government hasn’t gotten involved in financing startups, is that there hasn’t been a huge need to do so, since you have a strong venture capital community.

DC: The Asian state-driven industrial model is being adopted by developing nations worldwide

I don’t think there really is an Asian model. The Chinese and Japanese economies have nothing in common other than they don’t look much like the United States. Developing nations tend to have much more state involvement since often the state is the only entity with the resources to do industrial development and basic R&D, but that has sometimes turned out quite badly.

The main reason that the US hasn’t tried industrial policy is less ideological than it didn’t work too well when people tried it in the late-1980’s. The story of Sematech is interesting here.

The problem in the US isn’t a lack of industrial policy, the problem is that US industrial policy is directed solely at military technology. No one else in the world has a F-22 stealth fighter invisible to Radar. The US Navy has the quietest nuclear submarines in the world (ie. but only 3 Virgina class subs to date). No one in the world has a more powerful, high-technology military than the US which was entirely state-funded.

US Neo-liberal economists can moralize all they want, it isn’t going to change how the real world really works. The Asian state-driven industrial model is being adopted by developing nations worldwide, and the US controlled IMF no longer has the power to prevent it.

Until 60-70 percent of the Chinese population is no longer working on rural farms, the argument that agricultural prices aren’t a constraint to revalue the yuan is flat wrong. And not all Chinese farmers grow rice. The rice growing region is mostly in southern Guangdong province. In northern China which has a similar climate to the US, farmers grow wheat, corn, and soybeans just like American farmers. The smaller scale of Chinese farms ensures that the US has a huge comparative advantage in agricultural production. Opening those farms markets to US produce would be politically destabilizing. Likewise the US imposes a 45% import tariff on Brazilian ethanol to protect US corn farmers from more efficient Brazil farming of sugar cane.

I am not so sure all of that that would be scary, it is just a matter of looking after state property better, being more rational about it and let banks do more dirty work. What else can you do when you want to remain in charge and modernize at the same time. Singapore’s lesson is that there are ways in which you can have a propsperous economy, participate in world markets, have a population that will not complain about lack of democracy (in the PRC’s case, is even fiercely nationalistic), and remain in power as an elite. As long as someone keeps discipline within the ruling class..I guess Americans will always have trouble with this.

But I do not think that CIC will ever develop the proportionality of Temasek. As said, Temasek is enormous compared to anything else indigenous in Singapore. That is a problem, but fortunately, Temasek is not big in absolute terms. I do not expect CIC to become the centre of a giant monotithic conglomerate uniting all of the remaing SOEs and manipulating international financial markets, Just an entity that keeps SOEs on the straight and narrow, at home and abroad. At home by requiring the banks to be genuinely profitable (perhaps allowing for cycles) and abroad by riding in the same car with the SOEs when making acquisitions. Maximum control for minimum effort. I doubt the investment function is the main raison d etre for them. So what would be scary is to have a bunch of people who have studied all the mistakes the Russians, Koreans, Taiwanese, Singaporeans and even the Japanese have made, backed up by reasonably effective ways to make people listen. Perhaps that is still scary..