article from mining news 16th sept FYIChinese dragon has only...

article from mining news 16th sept FYI
Chinese dragon has only just awakened: KPMG, CommSec

Tuesday, 16 September 2008
Kate Haycock

AS GLOBAL markets suffer another round of seizures and the US financial system seems set on self destruct, China evangelists still believe the Asian nation’s large population will continue to cushion Australia’s mining industry from the worst of the global slowdown.



Speaking at the 2008 Excellence in Mining and Exploration Forum in Sydney, Paul Glasson, KPMG’s Strategic Alliance Partner in China, and Craig James, chief equities economist for CommSec, both continued to sing from the same hymnbook.

Glasson, who is based in Shanghai, said evidence for a slowdown in Chinese growth is unconvincing.

In recent weeks media reports about the weakening demand for resources in China and a real estate slowdown in the nation had emerged, but he said they were significantly overstated.

He said much of the evidence for stalling growth in China came instead from an industry shutdown during the Olympics and the government’s conscious effort to slow inflation.

“The Chinese market is not slowing down – economic indicators have come off on the back of the Olympics.

“Construction was halted two to three months over the Olympics and government policies have tried to take the heat out of inflation.

“There’s talk that real estate has dropped 40 per cent – but that would have to be absolute marginal cities, or in the absolute outer districts. In terms of inner-city, say in Shanghai, prices have gone up in the last three to five months.”

Glasson also said the slowing of the GDP from more than 12% back to around 9% in coming years was not a crisis and the country’s infrastructure growth would continue.

China’s planned major infrastructure projects include a national rail program investment worth $US182 billion, ports, pipelines, 51,000 kilometres of highways, office building in major cities and the rebuilding of the Sichuan province after the earthquake.

“On the back of this continued demand and consolidation of the steel industry, Australia is well positioned for the outward flow of capital from China, especially mining companies,” Glasson added.

Glasson also predicted Chinese national investment in Australia will continue because of the strong demand and need for resources.

CommSec’s James echoed Glasson’s comments, claiming the Chinese dragon has only just begun to awaken.

“We’re also going to look back on this time and say this was when China emerged as a nation of power,” he said.

“We’ve had slowdowns before … and yes, we’ve had a slowdown this year and it is going to extend into next year. But if you look at the longer-run period of economic growth and [the world] is still travelling quite nicely.”

He said China would continue to grow and the nation had only just started down the path of a country like Japan, and growth rates of 10% a year should continue for the next decade.

Significantly, James also said Beijing’s move to cut interest rates in China was important for encouraging growth after the Olympics slowdown.

“A slowdown was always going to occur with the Olympics ... they’re going to be ramping up industrial production yet again,” he added.

“[And] with China committed to fuelling economic growth we can be more optimistic about our future.”

However, James did sound a note of caution for Australian equities, saying that while China’s growth would continue, fear would remain the dominant characteristic on the share market.

“We’re only one year into the downturn, and confidence will take some time to recover,” he said, suggesting a full recovery of the share market could be as much as several years away.