I have seen the future, and it involves a Chinaman in an air-conditioned crane.
From the top of the Jin Mao tower in the Shanghai district of Pu Dong, I looked down on an economic miracle – an entire Manhattan of skyscrapers built on a reclaimed swamp, and all of it completed within twenty years!
Shanghai was always a patchwork, with a unique history of districts carved out of the city – concessions to European colonial masters. But now, the city, which hosted the formation of the Chinese Communist Party in the 1920s, hosts Pu Dong a new 21st century city-within-a-city, an iconic monument to Chairman Deng’s historic pronouncement that, ‘The market is socialism’s last friend.’ It was said that one third of all the working cranes in the world were recruited in the Herculean task of building this orgy of concrete, glass and steel across the Huang Pu River from Old Shanghai.
And just in case I thought this transformation was strictly localised, Shanghai only served to soften me up for the shock of seeing what’s happened to Beijing since my last visit in 1987. The sea of bicycles and Mao suits that I remember from eighteen years ago has given way to massive traffic jams of locally produced and imported cars, accompanied by the fashions and shopping plazas once restricted to the Hong Kong territories.
Thanks to Sharyn Raggett
On my return to Oz last week, I was struck by the media attention given to BHP Billiton’s profit announcement, and the comments by the company’s chief executive, Chip Goodyear, about how confident he was that our economic future can ride the current Sino-Indian boom Let the good times roll, baby! After all, hasn’t this demand for our resources been underwriting our economic growth for the past decade, despite the slowdown of the US economy, and the tech-crash, and the meltdown of the Asian ‘tiger economies’?
As stories go, this is a whopper! BHP Billiton announced an all-time Australian record headline profit of $US6.4 billion, up from $US3.4 billion in 2004, and projected to be nearly $US9 billion for the 2006 reporting year. Over the last four years, BHP Billiton’s sales to China of minerals and energy have increased from $US371 million to a colossal $US3.9 billion.
Even more significant is the reported contribution to BHP Billiton’s earnings of the increase in the prices of minerals and energy attributed to Chinese demand: $US5.1 billion. China is now BHP Billiton’s largest single market, representing 12.6 per cent of total sales and accounting for an 89 per cent jump in profit – at a time when OECD demand for minerals and energy is sluggish and uncertain.
So, no China, no story.
Let’s check across town at Rio Tinto to make sure I’m not imagining things. Rio Tinto recently reported a half yearly profit of $US2.1 billion. This is up 110 per cent on last year. The full 2005 profit is estimated at $US4.4 billion. And it’s projected to be $US4.7 billion for 2006. The two resource giants together make more profits than Telstra, Commonwealth Bank, Woolworths and Qantas combined.
Thanks to Peter Nicholson at The Australian
This has profound implications for how our economic base is perceived. First we rode on the sheep’s back, then we ‘industrialised’, then we diversified into services (which seemed smart at the time). But does the phrase ‘The world’s quarry’ ring a bell?
I am haunted by the image in Richard White’s book Inventing Australia (1981) of the massive quarry that dominated Canberra during the building of the new Parliament House. And because we are a primary producer and an inefficient manufacturer, I am daunted by our dependence on our big brother with the big stick. Daddy, do we still have to chant, ‘All the way with (insert President’s name here)’?
But all my back-to-the-future kneejerks are tempered with a recognition of a new reality, a new world order in the making that goes far beyond the micro-analysis of our corporate, financial and media pundits.
Firstly, when listening to my Chinese friends in the diplomatic, corporate and service sectors (with adopted names like Chuck, Cherry and Jen), there is a general optimism about their future. It is not based primarily on China’s export-led domination of world trade but on its internal wealth creation and the raising of domestic living standards. China has seen a massive investment in infrastructure, housing and consumption; not just tax-free factories and military assets.
Chip Goodyear talked effusively about seeing millions of (locally produced) air conditioners on the massive Shanghai apartment developments as he drove around that city recently. And he was right to enthuse. He was also insightful about the startling revelation that an estimated 80 per cent of resources sold to China are consumed for internal growth, and less than 20 per cent is on-sold as processed exports.
Secondly, China actually runs a trade deficit with most of the rest of the world. Of course, the conspicuous exception is its massive trade surplus with the US. In 1994, China was a net importer of manufactured goods and now it has a surplus of over $US65 billion (and growing) primarily with the US.
Why have I jumped back to the economic analysis of China when looking at our quarry-led future? The answer is not simple and will be followed up in future contributions to New Matilda. But to stimulate the debate, I think that it is worth looking at how all these facts and figures about China upset the accepted models of economic development that we’ve been working with up to now. We need to revise these models before conjecturing about Australia’s position in the new world order.
In the post-World War II period we were served well by Andre Gunder Frank’s concepts of the First, Second and Third Worlds. This placed Australia in a unique position as a primary producing economy which still benefited from inflows of First World capital and the ensuing development of a secondary industrial base (unlike Chile). With the collapse of the USSR and its satellites, the term ‘Second World’ withered away from under-use and economists’ metaphors shifted to describe a ‘North South Debate’.
But neither of these models can easily accommodate what we now encounter in an ex-Second World, centrally planned economy as it completes the mother of all Keyenesian pump-primes, develops massive infrastructure, finances huge internal consumption, attracts massive foreign capital, and still manages to run up a level of foreign reserves second only to Japan, while becoming the second biggest creditor and de facto banker to the world’s present-day self-styled superpower.
I leave you with three thoughts doing the rounds in Shanghai: ‘Were getting very close to Europe we need their high-tech to achieve military parity’; ‘The biggest think tank in the US administration is not looking at Iraq but at us’; and ‘First we build Manhattans and then we take ‘ (with apologies to Leonard Cohen).
Next week: ‘On a clear day in Shanghai, you can see forever’, more about the importance of China in the 21st century.
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