China's Rural Growth Spurs Copper Demand

By Bloomberg News —China's worldwide search for copper begins in the gnarled hands of 76-year-old Yang Caiguan, who is fiddling with the cables of his digital television tuner. "The red plug should go into the red hole," he mutters to himself, hesitating to make the connection. Around him sit amenities of modern life—flat-screen TV, air conditioners, washing machine, water heater and gas-ignition stove—that were foreign to him and his wife until this year. With their new apartment in the central Chinese town of Daojiang in Hunan province, the couple acquired at least 41 kilograms (90 pounds) of copper in electrical wiring and appliances, about 10 times the nation's annual per capita consumption of the metal.

As subsistence farmers they had used little copper for most of their lives. The Yangs' transformation into urbanized consumers epitomizes the Chinese government's vision for the next—and potentially biggest—phase of its economic rise: bringing the prosperity of its coastal boomtowns inland, where more than half of its 1.3 billion people live, mostly in rural homes. China is on pace to almost triple its annual use of copper to 20 million tons in 25 years, according to CRU, a London-based metals and mining consulting firm. That's more than the world produces today. Rising demand will create a potential global shortage of 11 million tons a year by 2035, CRU forecasts.

"There is absolutely torrid growth taking place in central China," says Daniel Rosen, a principal of the Rhodium Group, a New York-based economic advisory firm. "It's going to build an Eastern China over again." The per-capita gross domestic product of inland provinces is less than half of that on the coast, according to data from China's National Bureau of Statistics. Even nationwide, China's GDP was $3,734 per person, ranking the country in between Albania and El Salvador, according to the International Monetary Fund."When politicians say China is a developing country, it's true," says Wu Jian, director general of the Rio Blanco Copper SA mine in Peru, owned by Fujian province-based Zijin Mining Group Co. "It doesn't all look like Shanghai or Beijing." The rapid expansion of suburbs like Levittown on Long Island after World War II helped lift consumer demand in the U.S., the world's largest economy. China, which leapfrogged Japan in the second quarter this year to become the second-biggest, similarly wants to grow towns and cities that will create jobs, raise living standards and boost consumption. The country's 10 percent average growth rate since the 1980s puts its economy on a trajectory to surpass the U.S. within 20 years, based on data compiled by Bloomberg.

Accelerating the urbanization of central and western China will push economies there to grow, Vice Premier Li Keqiang said in a speech in February. Boosting domestic demand and moving people into cities are priorities to maintain China's fast long-term growth, he said. The government aims to quadruple per-capita GDP from 2000 to 2020. Copper is at the heart of the development. China's consumption of the metal has tripled in a decade to an estimated 6.8 million tons this year, according to CRU. Atomic number 29 on the periodic table, the material is one of the best conductors of heat and electricity. In use for 10,000 years, it provides the electrical core of homes, cars, computers and mobile phones.

The Yangs were thrust into China's consumer society by their factory-owning son, Yang Dongsheng. He spent 350,000 yuan ($52,500) to buy and equip their four-bedroom apartment in Daojiang, 500 kilometers (311 miles) from China's southern coastal manufacturing belt where he made his fortune. He wanted to make them comfortable out of a feeling of "xiao dao," the Chinese expression for filial piety, says Yang Dongsheng, who is 35 and the youngest child.

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