All aboard the bus to China

THE Australian Ambassador to China, David Irvine, took advantage of the Lunar New Year holiday to make a quick trip home, and talk to a business audience about developments in the Middle Kingdom. Interestingly, he is the fifth consecutive native-born Western Australian to hold the post of our man in Beijing. His predecessors were Rick Smith, Mike Lightowler, David Sadlier and Ross Garnaut. That is an impressive local batting order, even allowing for our strength in the top three Australian exports to China – wool, petroleum and iron ore.

A career diplomat, Mr Irvine first worked in Beijing in 1982, when the PRC began opening its economic doors. That put him in an ideal position to watch what he describes as “a monumental process of transition unprecedented in history”. China’s growth rate, even in slowdown mode, is running at 7 per cent. Some commentators claim that number is rubbery, but the ambassador believes it is “about right within a point or so”.

He sees the economy doubling in size in a decade, and overtaking Japan in 20 years. World Trade Organisation membership would provide the “bulldozer” to push one fifth of mankind into a modern industrial economic force. It will also bring grave problems, as agricultural subsidies are dismantled, and an estimated 200 million people move from the land seeking jobs in the cities. There are already 40 million unemployed in the north east of the country, and huge areas of inner Mongolia now resemble a desert – encroaching on Beijing at one kilometre a year.

Mr Irvine says one of the greatest challenges facing China is reform of the banking sector, which is dogged by bad loans to State-owned organisations, hampering the creation of a modern financial system. The prospect of 260 million people in China reaching the age of 60 within 10 to 15 years, and a projection of 800 million grey heads by 2050, demonstrates the need to build a superannuation system of staggering size. That will require mobilising the vast savings pool in China, which is put at the equivalent of $US700 billion. There will be a role for Australian insurance companies and investment banks in this process.

Two-way trade between the two countries is worth more than $12.5 billion a year. Mr Irvine says there are tremendous opportunities ahead for Western Australia in further minerals and energy sales, educational and other services, and involvement in China’s critical environmental infrastructure needs.

Local runners proving the best bet

STAY-AT-HOME parochial Western Australian investors are totting up their winnings. One day last week we hit the trifecta when Wesfarmers, Bristile and Foodland all unveiled half-year figures that sent their share prices soaring. Throw in AlintaGas, which reported a little earlier, and you had the quartet.

There is a nice symmetry to Wesfarmers now being the 12th largest company in Australia, capitalised at $12 billion. Michael Chaney must be tired of having his praises sung on the front page of newspapers’ national business sections. His shareholders are not. Most of them have doubled their money in a year.

So too have backers of the Bristile brick and tiles outfit. The stock has climbed virtually non-stop to $2.90 where the prospective yield is still 5 per cent and the price earnings ratio is under 12.

Short-sighted punters who sold Foodland at $11, when the New Zealand authorities knocked back its bid for Woolworths, have watched them rise to $14.90. The impetus was a crackerjack 30 per cent jump in sales, which had analysts rushing for their profit upgrade pencils. Foodland CEO, the indefatigable Trevor Coates, plans yet another appeal against the Wellington thumbs down.

The AlintaGas boardroom must be as tight as a drum. The share price was waddling around at $3.60 in front of the surprise excellent interim figures, which shot them through $4. The extra tot on the dividend went down well with the nearly 80,000 local shareholders, particularly since AlintaGas chief Bob Browning had told us to regard the shares as a growth rather than yield play. Nice to have both.

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