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China and Australian Dependence
“Australia is just about the best modern economy in the world. And China will keep us that way for quite along time”. It must be true, innumerable politicians have told us so.
The unstoppable development and modernisation of the emerging Chinese economic powerhouse will provide an insatiable whirlpool for Australian natural resources, coal, iron ore, agricultural produce, and just about everything else Australia produces. The miners especially will triumph, resource rents will pile up and governments can get cheeky increase taxes and share the booty all round the country.
It is an amazing story for the “lucky country”, a wonderful dream, unfortunately the nation is just about to wake up and the dream was a nightmare.
The Chinese economy is slowing down at an alarming rate. The 20 trillion yuan governmental stimulus back in 2008 has gone … well, just about nowhere. The governmental investment was mainly in infrastructure, it was meant to multiply and spin off consumer spending and investment. But it hasn’t achieved this. Chinese consumers are scared, just like consumers everywhere are scared at governments inability to deal with the economic crisis begun 4 years ago.
All round China the overcapacity of infrastructure and unfinished projects are seen everywhere. Highways to nowhere, unfinished and sinking back into the rural landscape. A super highway with only three bricklayers slowly substantiating a retaining wall. Forests of high rise apartment buildings, their for sale signs tearing away forlornly in the winds.
Chinese consumers throughout the country will tell you they are in an economic recession, been that way for the last 4 years. They are too scared to spend, who knows what will lie ahead. It all belies the official statistics. But who creates those numbers anyway? Here a stat, there a number, what level of growth do we wish to spin today?
The progress and advancement in living standards in China over the past 25 years has been a phenomenon, possibly the greatest advancement in human welfare in the planets history. But the average Chinese citizen is not happy. Like voters in the west, the Arabian states and just about everywhere,they have become disillusioned with their leaders. Not to be trusted, corrupt, lacking transparency, pigs in the trough swilling for themselves. It all sounds very familiar (Actually the fact that the Chinese leadership has been able to achieve the miracle is quite a credit to them, somebody has done something right somewhere).
The Chinese consumer did not get much out of the first government 20 trillion yuan cash splash and the recent 2 trillion yuan upgrade with its token consumer investment will hardly be noticed. The Chinese citizen – consumer thinks the government has just about run out of money, they are preparing themselves for an extension of the hard economic winter. No profligate spending on consumer electronics, the new car (China has a cash for clunkers!) the new apartment, the second apartment. The old folks are really upset, where has their retirement gone? The young people hope to hang on.
Hopefully this amazing country with its stunning lack of dogma (viz the US or the Arabian Gulf), and it’s burgeoning capitalism will just pause for breath before beginning its next surge to economic stardom … Japan, here we come!
But the economic slowdown is a reality and it may take another five years for the people of China to get their confidence back. Chinese consumers have proven to be not a replacement for American consumers. The infrastructure boom which sucked in mountains of Aussie resources is history. The next growth spurt boom in China will be all about domestic consumers, and that will be entirely different to the infrastructure boom.
In the meanwhile, certain Australian politicians looking for a “narrative” to sustain their feeble government will need to face up to the reality that the Asian – Chinese century will not be in evidence at the next election.
Where will they spin next?
China and Australian Dependence
A. K. Dragun
(July 2012)
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