Published in the October 2010 Australia’s Mining Monthly

Just because you do not understand it, does not mean it isn’t real. No, I’m not talking to the climate change denialists, but to the China sceptics.

They’re out there, heaps of ’em, rabbiting on about a China bubble that will disastrously pop, claiming it is all a Beijing fraud, warning that it will take Australia down. Sometimes the venom they exhibit in anonymous online posts is surprising – an almost religious fervour with more than a touch of xenophobia. Or maybe it is a reflection of fear and dislocation.

It’s tempting to dismiss them as ratbags and move on – and I generally do – but here it’s also a case of just because I don’t believe them, it doesn’t mean they don’t have impact.

I ran into an old school mate – no, let me rephrase that: I ran into a mate from school days and we’ll leave age out of it.

“What do you reckon about China?” he asked, as one might ask what one thought about cold fusion, or moral relativity in medieval literature – they’re big questions. Before I could answer that I thought it was a populous nation in Asia, he explained he was asking because his stockbroker had just told him China was about to implode, that it was a house of cards, a bubble etc and he should sell his China-exposed stocks.

So I told him that, being a mere finance journalist, I don’t give advice, but if I did, it would be to get a new broker.

For a start, selling his China-exposed stocks would mean selling everything. China crashing would make our extremely mild global financial crisis experience look like a holiday in Tahiti with the movie star of your choice. It would cause something worse than the Great Recession that the global economy, or at least the North Atlantic economy, has technically come through.

China imploding would take the rest of emerging Asia with it, never mind little ol’ Oz, Brazil, Canada and everyone else, snuffing out the weak recovery in the North Atlantic nations and tipping the PIIGS (Portugal, Italy, Ireland, Germany and Spain) into the mud.

It’s the emerging nations’ growth that has the global economy recovering to something near trend.

Another shock to the global system would indeed be harsh right now as the North Atlantic nations have used most of their ammunition fighting the last war.

I’d bet the anonymous stockbroker hasn’t sold everything he owns because he probably isn’t bright enough to think through the full implications of such a statement.

But the preceding three paragraphs were a waste of space. It’s like considering what a fair-sized asteroid hitting earth would do. It’s not impossible – it has happened before – and the effects would be calamitous. However, a sane person would not structure his or her share portfolio on the assumption that it is going to happen tomorrow. (Memo to self: check the heavens before retiring tonight – just in case.)

Talking of star-gazing, the stars aligned last month with four speeches and papers in quick order on the China and India stories. I tried to wrap them up in a general spray for Fairfax digital – Google it if you like, the headline was You Ain’t Seen Nuthin’ Yet.

The gist of the article was that we really do not grasp the emerging nations story because it is just so large. China is still in the early stages of its emergence and India is well behind that. China is starting to move from its labour-intensive growth phase into its capital-intensive growth phase.

India is just starting to move into labour-intensive growth. Some 400 million Chinese have moved from the farms to cities over the past 30 years and another 300-400 million will do the same thing in the next 20 years. The middle class, the number of people who are “relatively” wealthy, will explode.

All that sort of stuff should be old news to Australia’s Mining Monthly readers who generally live the story. However, even those of us who try to stay on top of what is happening in China have trouble getting the reality of it.

Anyway, Fairfax opened up the comments section for a few hours and the response from readers was, well, mixed.

There were many who got it, but there were also plenty who rejected the whole idea and some who accused me of all manner of failings. Trying to talk up the market for my own gain, being on a China-sponsored tour, wearing a striped tie with a checked shirt, just about everything except being a Collingwood supporter.

My general policy is that I am privileged to have access to such a platform. I have my chance to put a thought out and should leave the responses, good and bad, to readers who care to post.

Yet, in this case, I could not help wondering why there was so much animosity towards a bloke just trying to pass on the thinking of the Reserve Bank of Australia, Clinton Dines (BHP Billiton’s top man in China for most of the past couple of decades) and Michael Power, Investec’s chief strategist.

Maybe it’s the striped shirt and checked tie thing … little else makes sense.

They are a pretty reasonable sort of bunch, having considerably more than half a brain between. While their ideas challenge the way we think about China, its role and power, the news is basically good for Australia and extremely good for our resources industry.

There is a hard core who are only happy when forecasting doom and gloom. I don’t understand them.

Others just seem repulsed by the idea that China does not need the West nearly as much as we like to think it does.

These are people that a couple of centuries of Anglo-centric propaganda and tradition have left incapable of thinking of another race, another culture, becoming Number One.

Very little is impossible in this world – me winning Oz Lotto clearly being part of that “very little”.

However, rational people can only deal with what is probable and discount the highly improbable. It is very improbable that China is about to collapse. It is very probable that it is on an increasingly sophisticated growth path, that it will continue to industrialise and urbanise, requiring massive amounts of natural resources. That it will continue to move up the value chain, generating greater wealth and choices for its people and those who trade with them.

We should be rejoicing in that as well as capitalising on it, not reacting as if we were part of a defensive American bloc wanting to fight a rear-guard action against losing influence. This is not a zero-sum game – played intelligently, everyone wins.

Michael Pascoe is a finance and economics commentator with more than 30 years experience in publishing and broadcasting.