The strong symbiotic relationship between China and the world stretches from $1.5 trillion in US treasuries to 58 tons ($5.1B) of iron ore imports last month. But with huge government stimulus, much of which is directed towards infrastructure, could this enable a step towards a more independent China?
A $586 billion plan representing 15% of GDP, designated to continue spending throughout 2010 will surely grow the domestic market for goods and services.
Taking iron ore as an example, domestic production comes from the mountainous provinces of Hebei and Liaoning, both bordering Inner-Mongolia resulting in a dependence on imports to supply the southern steel mills. Although the quality of imported iron is deemed to have a much higher concentration of iron (BHP and RIO average a 61% concentration), would it not be cheaper buy domestically? And the answer is not yet.
With better roads, railways and extraction equipment, China could be on its way to meeting its own demands, and hence becoming a country with less reliance on the western world. The question is if this is what the government wants?