“Beautiful things grow to a certain height, and then they fail and fade off, breathing out memories as they decay.”
F. Scott Fitzgerald
Australia must be careful not to place all bets on ‘red’ on a miraculous Chinese revival post-pandemic. The Chinese economy shrunk by 6.8% in the first three months of 2020. Australia’s economy only shrunk by 0.1%. The trade war with the US has put tremendous strain on the Chinese economy prior to the COVID-19 outbreak, it was estimated that the trade war with the US cost upwards of 2 million job losses in China.
China is caught up in multiple conflicts with many of its neighbours, including the June 21 flare-up along the China-India border ‘the actual line of control’ where People’s Liberation Army troops brutally murdered 20 Indian soldiers with nail ridden poles and rocks. It is thought more than 40 PLA soldiers were killed by Indian soldiers, on both sides, it is thought that soldiers were killed by being thrown off cliffs and tossed into icy Himalayan waters.
The protests on the streets of Hong Kong which began mid-2019 combined with growing judicial and legislative uncertainty sparked a capital flight out of the financial hub of Asia, according to The South China Morning Post 4 billion Hong Kong dollars found its way to Singapore.
Further, the prospect of hundreds of thousands of Hong Kongers seeking refuge in Australia and Britain under British National Overseas passports (BNOs), and billions of capital fleeing Hong Kong show that many millions don’t trust agreements with China anymore.
Conflicts in the South China Sea, resulting in the sinking of Pilipino and Vietnamese fishing ships, show that China is losing friends and respect in the Indo-Pacific.
Australian iron ore and coal have built modern-day China. The attitude that we should wait for China to rescue us is akin to the blissful ignorance of a child, thinking that Santa Claus delivers presents, yet it’s the hard work of mum and dad that make that happen.
As the China-America duopoly faces immense strain, with the US having technological supremacy and the PRC having manufacturing supremacy, the house of cards may fall, and new players may be dealt a new hand that no one ever saw coming.
Many companies are moving there ‘technological supremacy’ to India, with Google and IBM making big moves into the subcontinent. Companies that need ‘manufacturing supremacy’ are moving to Vietnam as seen with Samsung and Nike setting up operations in an environment where labour is cheaper, and governance is more stable and dependable.
Australia must position herself as the merchant banker of prosperity, as coal, uranium, and gas are the fuel that is required to build and power nations.
The mining boom saw iron ore prices at $283.84 per ton in 2008; the price of Iron ore is sitting at $151 per ton. Boom times don’t last forever; markets like empires rise and fall. When old empires fall, new empires are being built.
Australia had an incredible period of economic growth, a period of growth that lifted a whole nation, improving wages, educational outcomes, and life expectancy.
Good times don’t last forever, and the honeymoon ends.
Old relationships end, new relationships begin.