Economic instability and uncertainty which have characterized the global economy since the financial crisis continue to cast a shadow worldwide, particularly in the mining space. While the US has recovered somewhat, the Eurozone continues to be curtailed by uncertainty and Australia has been hit hard by depressed resources prices, high cost of doing business, over-reliance on mining and lack of capital for exploration, mine development or expansion. Despite the doom and gloom, the global outlook is becoming more optimistic and there are signs that the mining industry may have hit rock bottom.
All eyes are still on China as its global influence is still very strong. Although growth has moderated, the long-term fundamentals driving China’s economy remain intact. Growth has settled at a new normal of 6-7% after years of double digit growth, which was understandably unsustainable.
While the slowdown has resulted in a shock to global commodity prices and many related industries, China is still growing at a faster rate than the world’s other major economic powers and the government is determined to continue its policy of bringing the entire country into the modern era. This has largely occurred in most of the country’s east but still there are around 500 million people in central and western regions yet to be industrialized, urbanized and brought out of rural poverty.
The transformation process has different stages and means many changes for the Chinese people. For the majority it means a new era of consumerism and increasing wealth, which means changing demands for minerals and other resources. The process means different industry sectors will be the prime movers while new sectors and regions will do well.
China clearly recognizes the risks and evolving nature of the country’s economic, social and financial terrain, and is dealing with the slowdown via a series of accommodating policy measures and reforms. The government has sufficient policy leeway to offer critical support and to off-set downward pressure on the economy.
Deep-rooted and often painful reforms must continue in order to safeguard not just the current cycle, but also the structural integrity of China’s economy and its ability to deliver on long-term development goals. Recent challenges such as the stock market gyrations and the RMB devaluation have knocked confidence and caused reverberations around the world but this environment has also increased the process of reform. As China transitions to a consumer-driven, service-oriented and higher-value-add economy, it has to grapple with mounting challenges, both old and new.
The western world, including Australia, must understand the process of change that is occurring and must change in order to meet the new demands.
Mining still has a big role to play in supporting the transformation but with increased emphasis on resources other than iron ore and coal.
As China becomes more aware of the need for sustainable development there is also an increased need for improved safety and environmental measures, and the rest of the world, particularly well developed resource-rich nations like Australia and Canada, has a role to play in helping it reach the standards commonplace in the west.
China’s changes are not to be feared but rather present new opportunities and signing off of the China Australia Free Trade Agreement (ChAFTA) is a must, particularly if Australia is to continue to benefit from China’s growth.
The current issue of The ASIA Miner examines changes taking place in China, the impact these have on global mining and the influence China has on mining. Specifically, we take a look at the ChAFTA and its benefits, the implications of new environmental measures, existing mining projects in China and ongoing investment by China in overseas mining projects.