Many Australian businesses may have no qualms about trading with China, but the national government may be forced into a corner on the issue.
IT’S not easy being rich, as China is discovering while it assembles the biggest pot of gold the world has ever seen.
Despite an abundance of super-cheap labour and strict discipline, China is struggling to integrate the free-wheeling philosophies of capitalism and the strict disciplines of communism – as Prime Minister Julia Gillard discovered last week.
Apart from photo opportunities for Ms Gillard and friends in the tourist attractions of Beijing, the most memorable event was a lecture from the Chinese media on the need for her to show ‘respect’ for China.
Perhaps something got lost in translation but that word, respect, jarred with anyone who understands what it means, with the Oxford dictionary tossing in suggestions such as ‘deference, esteem or honour’.
And if you want to take the game of definitions a few steps further you find that deference means ‘awe’ or ‘obsequiousness’, and obsequiousness means ‘fawning’ or ‘toadying’.
Get the picture? Armed with an estimated $3 trillion in savings and a super-efficient export sector, which is tipping more billions into the pot every week, China is now demanding that the rest of the world acknowledge its economic success and kow-tow accordingly.
This new demand from China for respect is a tricky problem for Australian business, especially the mining and oil industries of Western Australia, which have profited handsomely from selling minerals and gas to China without giving a second thought to any moral questions.
Well, the moral question of China is arriving at speed even if Australia wishes it would not, because it threatens to upset our easy ride on the coat-tails of the rampant (and rich) dragon.
In the same week that Ms Gillard was being shown the sights of Beijing, other events were unfolding, including a crackdown on dissidents by the Chinese police (secret and conventional), and there were fresh reports of deep unhappiness about China’s ‘invasion’ of Africa.
Intolerance of dissent is a well-understood feature of all bullies, as is a craving for respect.
Less well understood is the African game being played by China, a direct re-run of the way Europe mistreated the hopeless continent for a few hundred years; first as a source of slave labour, and later as a source of cheap raw materials, and dumping ground for cheap exports that undercut local manufacturing.
A few numbers tell the China-Africa story. During the past 10 years, Chinese imports from Africa have risen from around $8 billion annually (mainly oil) to around $65 billion. Exports to Africa are up from $9 billion to $60 billion – a total trade flow of around $135 billion a year.
Unfortunately, one of the exports from China is the same intolerance seen in the treatment of dissidents at home – and unfortunately for China there is increasingly close international media and government attention being paid to the China-Africa problem.
What has this got to do with Australia? Well, we got a sniff of that last week when the same people misbehaving in Africa, and cracking down on dissent at home, demanded that we shown them respect.
In time, perhaps sooner than most business people would like, Australia will be asked whether it is on the side of Chinese financial success, or Chinese morality.
For Ms Gillard, the choice will be painful. Sign up with the money that China is splashing about as some Australian companies have done, stick with her social democratic beliefs, or try sitting on the fence.
Clash of cultures?
IF this sounds like a political rant then you’re only partly right, because there is an increasing number of Australian companies worried about their Chinese connections – with four local examples worth thinking about.
The best known is the long-running saga of Andrew Forrest and his ‘lost in translation’ experience about whether he had a ‘binding’ contract to sell iron ore, or not.
More apt in the current context are these three:
• Mt Gibson Iron Ore’s inability to get a Chinese customer to pay an outstanding $US114 million bill, despite winning a series of court cases and with the backing of international arbitration;
• Gunson Resources discovering that a potential Chinese partner was trying to snatch effective control of its Coburn zircon project; and
• Alkane Resources making a deliberate decision to not have any Chinese involvement in its Dubbo zirconia and rare earths project in NSW because of concerns similar to those experienced at Gunson.
If there was only one example of a Chinese company misbehaving, or simply not understanding how business is done in Australia, it could be explained away as a cultural clash.
It is far more than that. It is China exporting its way of doing business, warts and all, and demanding respect in the process.
AUSTRALIA’S changing relationship with China is not the only business situation that requires an expanded explanation.
Last week, the noted British economist Jeremy Grantham shocked his followers by dumping a career-long belief in all asset classes ‘reverting to their mean’ over time, a way of saying that prices that rise too fast always fall back.
Resources, Grantham argued, are now different thanks to a combination of rising world population, China’s economic miracle, and declining availability.
For North America and Europe, that’s the bad news. For Australia, that’s the good news. But, if Australia is to enjoy the benefits of Grantham’s conversion and a period of sustained high prices caused by the biggest economic event since the industrial revolution, how can he maintain his view that Australian residential property prices are overvalued by 50 per cent?
Grantham can’t have it both ways – a boom in Australia’s terms of trade and a fall in property prices.
Perhaps he’ll issue a property-price correction when he thinks a bit deeper into his resources rotation.
WHAT’S in a name: There’s a job going at the United Nations which seems, at first glance, to be designed for someone from WA. It is director of Mine Action Service. The problem is that you’ll be located in the Peacekeeping Operations division – one man’s mine is another man’s k’boom!
“Peace on earth would mean the end of civilisation as we know it.”