MARKETS

China productivity issues are the wind at miners' backs

Forget the market's spasmodic reactions to small movements in China's GDP data. The superpower's ...

Anthony Barich
China productivity issues are the wind at miners' backs

Raby, who held various postings throughout Asia and Europe since joining the Department of Foreign Affairs and Trade in 1986, told delegates in Perth yesterday that while more than 30% of China’s population would be aged 60 or over by 2050, due to its one-child policy, this changing demographic profile could be well supported by strong productivity.

While admitting there were likely to be more factors, Raby identified five big drivers of productivity growth in China that were “the highest priorities in terms of government economic reform policy”: urbanisation; transport networks; education; poverty; and financial sector reform.

After BT Group chief economist Chris Caton put forward the case that China would continue to grow, Raby explained why, emphasising that China’s catch-up game with the West provided a “massive opportunity” that wwould see decades more of resource intensive growth.

In his talk titled “Dawning of the Xi era – implications for Australia’s resources industry”, Raby said that the 300 million people moving into the cities – which wwould continue to drive demand for resources to build them – was an important driver because productivity in urban areas was greater than that in rural areas.

The government’s plan to cover the country with efficient transport networks, which to date it has not had, also means that the individual parts of China which have historically have always been isolated can now be linked, which opens up the possibility of specialisation of different regions according to their regional comparative advantage.

This will also drive productivity growth.

The third driver he named was education, where China was “still starting from a long way back”.

“So everyone who enters the workforce – and will continue to do so for a long time – will be substantially better educated than those they are replacing,” Raby told ILN sister publication MiningNews.net on the sidelines of the AMEC Convention.

He also noted that China was still a poor country, ranked 84th poorest in the world in per capita income terms. Its per capita income was just 14% of the United States’ per capita income, and its steel consumption was just where the US’ was in the 1950s.

“The point is, there is this massive opportunity to catch up – and of course China is a long way inside the global possibility frontier, which means it has years and years ahead of it to draw down on the global stock of knowledge, and modify and adapt it to its own circumstances to get productivity growth from that,” he said.

“Lastly – which is subject to contemporary policy in China – is reform of the financial sector, which today is utterly unsuited for the sort of financial sector the economy needs, and will need in the future.

“You have at least a decade or more where growth will be resource intensive, with 300 million moving into the cities, as iron and steel consumption moves to where the US was in the 1970s, 80s and 90s.

“It has a massive growth path ahead of it, and it is all resource – and particularly iron ore – intensive.”

While 60% of all freight movements in China by rail and truck consisted of just coal – moving the internally produced coal elsewhere within the country – Raby insisted that improving China’s transport infrastructure would not necessarily mean it would no longer need Australian coal.

“China has the world’s biggest coal reserves, but they’re located away from population centres, and it chokes up the transport system,” Raby said.

He said it was important to remember that China’s population was still growing at an enviable rate, and seaborne trade would always be more efficient.

“It’s cheaper to bring coal in from Australia and drop it on the coast than it is to bring it inland from all those rural mines,” he said.

TOPICS:

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining Monthly Intelligence team.

A growing series of reports, each focused on a key discussion point for the mining sector, brought to you by the Mining Monthly Intelligence team.

editions

ESG Mining Company Index: Benchmarking the Future of Sustainable Mining

The ESG Mining Company Index report provides an in-depth evaluation of ESG performance of 61 of the world's largest mining companies. Using a robust framework, it assesses each company across 9 meticulously weighted indicators within 6 essential pillars.

editions

Mining Magazine Intelligence Exploration Report 2024 (feat. Opaxe data)

A comprehensive review of exploration trends and technologies, highlighting the best intercepts and discoveries and the latest initial resource estimates.

editions

Mining Magazine Intelligence Future Fleets Report 2024

The report paints a picture of the equipment landscape and includes detailed profiles of mines that are employing these fleets

editions

Mining Magazine Intelligence Digitalisation Report 2023

An in-depth review of operations that use digitalisation technology to drive improvements across all areas of mining production