MIKE MOORE

There are only two types of people today, those who are talking about China and those who are not. Every day there is another interesting headline and story. The Economist carries more stories about China than anywhere except the United States.

Here is just a sample from the past few weeks: Chinese can now take more money out of the country; banks can accept more foreign investment; global newspapers like the International Herald Tribune will be printed in China; and western trade unionists are excited over the prospect of China insisting that Wal-Mart accept unions, which is being negotiated with the global trade union movement.

Wal-Mart's imports from China are so large that if it were a country, it would rank as the 10th-largest importer. Wal-Mart, which employs one million workers in North America, will not deal with unions, although one, lonely, endangered branch in Canada is now unionised. It is true that China's trade unions are hardly independent - nor are the courts - but watch this space.

China is now the world's third-biggest exporter and should be the fourth-largest importer this year. Just three years ago, it was being attacked because of its export success; now the same people are warning of the impact on global growth if China's economy slows too much.

Then there is the currency issue, China pegs the yuan to the US dollar, which neutralises much of the benefit US manufacturers hoped to gain from the dollar's plunge. Beijing will not float its currency until the banking system is in order, nor should they. During the US election, manufacturing outsourcing was an issue, but a bigger problem is America's outsourced savings. China is a major player in bridging the US deficit. It is the biggest recipient of direct foreign investment and is now investing massively abroad. This is the next big story. China's energy imports have risen almost 40 per cent in the past 12 months.

Beijing is doubling strategic oil reserves, to equal those of the US or Japan. Oil consumption has doubled in 10 years; China has gone from self-sufficiency to the world's second-largest importer of energy.

Now it gets very interesting. The People's Daily has said that offshore oil reserves amount to about 28 billion tonnes. Experts contest the figure, but even if reserves are only half that, it would equate to more than 100 years' supply at the present rate of energy imports. So where are these offshore reserves? Around the Chunxiao gas field in the East China Sea, the centre of a dispute between Japan and China. Meanwhile, PetroChina has applied for licences to explore in the South China Sea, where sovereignty is disputed with Southeast Asian countries. Beijing says it is committed to a diplomatic resolution of these claims.

China is literally investing in everywhere there is energy. Pipelines from central Asia are being built, and President Hu Jintao has just announced a Brazilian energy deal worth almost US$11.5 billion. China is still heavily dependent on the Middle East and now has a stake in its stability, a fact that changes everything. Will there be rivalry, competition, confrontation or co-operation? The invasion of Iraq meant that China lost important supplies.

Economic integration now means that our needs are similar. We all want stability, and being each other's customers and suppliers should lead to more co-operative global economic and political policies. All of this will have an impact on China's foreign policy.

China's political hand will grow to meet its economic strength in places as diverse as the Sudan, Iran, Russia, Colombia, and in its own backyard. This will be one of the great challenges of this century.

Mike Moore is a former prime minister of New Zealand and was director-general of the World Trade Organisation.