Many causes and conditions have ripened at once.

Europes austerity-driven weakness has

affected Chinas export industries; likewise Americas gradual recovery. The willingness of
the Saudis to keep pumping oil to the max, despite low prices, was a surprise, a long term
gamble to drive out of business the newer players, such as American shale oil producers and
the Russians, whose energy industries remain profitable only if prices stay high.
But what the Saudis did, other big players have now done, in other key raw
resource industries. Iron ore, the primary ingredient of steel making, is dominated by a
few giant global corporations who made a similar calculation to the Saudis, that they could
remain profitable even on low iron ore prices, while newer entrants to the global iron ore
traffic, with loan finance to service, had higher costs, and would be driven out. We are in a
different world, where the powerful are willing to endure a period of pain to maintain their
oligopolies.
Is China an onlooker in all this? Not so. China has been playing the same game, in
which there are only two options: get big or get out. China took full advantage of its
near-monopoly in production of rare earths, a range of elemental metals that have
innumerable high-tech uses. China worked especially hard to dominate the global market in
manufacturing aluminium, building huge smelters dependant on massive amounts of
electricity, usually provided by coal-fired power stations. In recent years, as coastal city
citizens get fed up with smelter pollution, the new smelters are being built far inland, in
Xinjiang, which also makes a troubled frontier region more Chinese, with more
employment for standard Chinese speaking industrial workers.
China has taken advantage of low prices to increase its stockpiles of strategic metals,
enabling smart warehouse managers to use the assets under their management as leverage
to finance access to capital, sometimes using the same piled ingots over and over as
collateral on multiple loans. Many have benefited from the collapse of the supercycle, and
the end of the mining boom.
But in the longer term, the Chinese model is in trouble. There is too much hot money,
concentrated in real estate, often money creamed off from urgent stimulus spending that
was meant to build productive infrastructure. There is too much bad debt, to be rolled over
and over in the hope that eventually, as the next up cycle ramps up, it will pay itself off out
of new profits. Maybe.
China is no longer the lowest cost factory, with the cheapest labour. China is now a
middle income country. Manufacturers are shifting to Vietnam, Cambodia, Bangladesh and
of course, far inland to Xinjiang and the foot of the Tibetan Plateau, in Sichuan and
Chongqing. That move was gathering momentum as I wrote the mining book, and has
gathered pace. I predicted that this would increase demand for the minerals, water and
hydroelectricity of Tibet, because it makes little sense to buy minerals from overseas and
then get them far inland, largely because the grand vision of the Three Gorges Dam as a
new inland waterway for big ships, as far in as Chongqing, never worked and probably
never will. So the global brands that now manufacture their high tech in Chengdu and

Chongqing will increasingly need Tibet as a source of raw materials. That part of my
argument may yet turn out to be true, but it is taking time.
A major reason for my counter-intuitive argument, in the 2013 book, that Tibet is not yet
spoiled, was that the mining and damming are exclusively done by state-owned
corporations that are restricted in how much profit they can make, by their party-state
owner, which deliberately discriminates in favour of manufacturers, and uses its political
power to hold down the prices of raw materials, water and electricity. That is still so today.
Large scale exploitation of Tibet seems imminent, but it has seemed imminent for as long as
Chinas central planners have announced mining Tibet as a pillar industry, which is
decades.
THE NEW CENTRALISATION
Thats the backstory. Then along came Xi Jinping.
Xis extraordinary centralisation of power came with announcements that private
enterprise would be allowed to play the decisive role in the economy, and that rigid price
controls on water, electricity and minerals would be relaxed. There would be reforms of the
state-owned enterprises, a crackdown on corruption and the China Dream would
materialise.
Much of this came to pass, and much is turning out to be not at all what was expected. The
corruption crackdown has exposed the oil, gas and minerals industries as major
corruption opportunities, including in Qinghai (Amdo in Tibetan) where the
Western Mining Corporation, which was involved in almost every major mine in Tibet,
became a special focus of the partys corruption inspections.
But the relaxation of commodity price controls is moving slowly, and there is less sign than
ever of private corporations playing a decisive role. In March 2015 came an announcement
that took everyone by surprise: far from downsizing the state-owned corporations (SOEs),
they are to be upsized, by a state-driven policy of mergers and acquisitions, to become even
bigger. This is what economists call agglomeration, an unlovely word that means what it
says.
Not so long ago, when reformist premier Zhu Rongji was inclined to listen to the World
Bank and neoliberal orthodoxy, the SOEs were trimmed, downsized, demerged, forced to
compete with each other. It began to look like China might follow the prescribed path of
market economics.
That is now decisively over. Once again, in todays world, big is better, biggest is best.