The peril in China's west  

Robert Gottliebsen at The Business Spectator has a look at unrest and fossil fuel reserves in China's wild west - The peril in China's west. I'm not sure I agree with his theory that difficulty in getting energy from the western regions would mean less demand for Australian resources (maybe they'd want more LNG, coal and uranium from us a result) but its good to see some reporting on this topic.

The riots in China’s Xinjiang province reminded me of a conversation I had about a decade ago with a group of Chinese from Beijing. They explained that in the province of Xinjiang there were vast oil and gas reserves but before they were properly developed the area would need to have a majority of Han Chinese from the eastern provinces.

Changing the population mix of an enormous area like Xinjiang which borders Tibet, India, Russia, Mongolia and other states is no easy task. But according to China Today, the Han Chinese now account for at least 41 per cent of the population.

Many of the Uyghur groups who traditionally dominated the area had moved out seeking jobs in eastern China to take advantage of the boom. Some of those people have come home because of the slump in manufacturing in eastern China which has cost 20 million jobs. The return of these Uyghur people may have increased the unrest pressures in Xinjiang.

The great weakness in the China growth story is that to date most of the benefits of the boom have been in the east. The recent solution from the government has been to substantially increase infrastructure spending in its western provinces. One of the biggest recipients of this infrastructure spending plan has been Xinjiang. The Chinese realise that Xinjiang is one of their most dangerous areas, but it is also one of the most valuable because of its vast oil, gas and coal reserves – including the potential for massive coal-seam gas developments, where companies such as Arrow Energy are in the front line. There is a gas pipeline to Shanghai and large new coal mines are planned.

In the next few weeks there will be many articles in our media about human rights abuses in Xinjiang and I have no doubt that many will be factual. But while not approving of human rights abuses, Australia has a lot at stake in western China. If western China starts to break up then the China growth story will also start to break down and with it will come a much lower demand for our resources.