Annual growth in China could be as low as 6 per cent as Australia’s largest export market focuses on internal issues such as environmental standards and air pollution, Premier Colin Barnett said today.
Speaking at a business leaders forum in Perth, Mr Barnett also said China would continue to focus on getting rid of excess steel production capacity, which he said was about 200 million tonnes per year.
“China has had 30 years of basically 10 per cent-plus economic growth,” he told the lunch sponsored by The Australian and Deutsche Bank.
“Last year they grew at about 7.8 per cent or thereabouts and probably about 8 per cent this year.
“The obvious explanation is that China is now a far bigger economy, number two to the United States, and you couldn’t realistically maintain plus 10 per cent growth every year.
“That is true, but there is another reason for what will be slower economic growth and it is a policy decision.”
Mr Barnett said the new administration in China was setting “quite a different policy agenda”, and was no longer pursuing “super economic growth”.
Instead, he said there was a focus on rebalancing the Chinese economy, achieving higher environmental standards, better air quality – “obviously an embarrassment to China internationally” – and greater equality of income and regulatory reform.
“My guess is you will still get strong growth but probably in that 6 to 8 per cent range, maybe more around 6 even than 8 per cent, as China deals with what it sees as its internal issues, particularly environmental issues and pollution, rather than simply pursuing growth,” Mr Barnett said.
He said Chinese steel production this year would be about 780mt but steel production capacity was well over 900mt.
“There is at least 200mt of excess capacity, often smaller, less efficient steel mills, many of them owned by cities or provincial governments,” Mr Barnett said.
“The Chinese government wants to get rid of that excess capacity.
“It’s also very clear that the days of rapid growth in Chinese steel production, and therefore iron ore exports (to China) have finished.”
Mr Barnett predicted that major iron ore expansion projects being pursued by the likes of BHP Billiton, Fortescue Metals Group and Gina Rinehart’s Roy Hill Holdings would be completed.
“But I don’t think you can look forward after that to seeing large expansions in iron ore production,” he said.