Rio veteran talks up China story
by Andrew Burrell, The Australian
November 26, 2012THE head of Rio Tinto's China operations has attacked the "impending doom camp" of China analysts as he launched a strong defence of the Asian giant's economic growth prospects and its future demand for Australia's commodities.Ian Bauert told the In The Zone conference at the University of Western Australia yesterday that 690 million people -- more than half of China's population -- now lived in cities and that the urban population would hit an estimated 1 billion by 2030.
The Shanghai-based executive's comments are significant as Rio is the only big Australian miner that has not scaled back its iron ore expansion plans in the Pilbara in the wake of China's economic slowdown and a collapse in the price of the steelmaking ingredient.
Mr Bauert has worked for Rio for more than 30 years and is regarded as one of the Australian business community's leading China experts.
He became head of the mining giant's Shanghai office in 2009 after a breakdown in relations with China arising from the Stern Hu affair and the collapse of Chinalco's planned $US19.5 billion investment in Rio.
Mr Bauert said in Perth yesterday that Rio believed China's rapid rate of urbanisation would drive resources demand for decades to come.
"Steel demand is intrinsically linked with urbanisation," he said.
"The average urban resident in China consumes 10 to 15 times the average rural resident. And urbanisation tells a large part of the China demand story, not just for iron ore but across a range of commodities."
Mr Bauert said there was no basis for continual reports in the Western media that the China growth story had ended.
"I think the complexity of China allows for commentators to select data to support almost any view of where the country is heading," he said.
"The 'impending doom' camp point to a series of major challenges confronting China: the leadership transition, income disparities, rampant corruption, migrant workers' status, incidents of social unrest, environmental degradation, and vested interests opposing reform, as the type of issues that will trip China up.
"These are undoubtedly real issues, and importantly they are issues that get a wide airing in China. But to somehow assume that the leadership will suddenly drop the ball ignores the fact that they have faced many such tough issues over the last 30 years and have still managed to pull hundreds of millions of people out of poverty faster than the world has seen before."
Mr Bauert said China's demand for resources would remain strong as its leaders attempted to rebalance the economy away from a reliance on exports towards growth fuelled more by domestic demand. "While we should not expect demand to grow at the blistering pace we have seen over the last decade, nevertheless growth in demand will still be substantial," he said.
"A rough rule of thumb is that minerals demand in a developing economy by and large tends to move in line with GDP growth rates.
"Projected growth rates of 7-8 per cent over the next few years, on a now sizeable base, is still substantial. Large volumes of iron ore, coking coal, copper, bauxite, and so on, will still be required. In the energy sector, despite China's strong push into renewables and energy efficiency, the demands of a more urbanised and industrialised population will necessitate large inputs of oil, natural gas, uranium and thermal coal.
"At any given time, the market for individual commodities may well be volatile, depending on the business cycle and short-term supply and demand factors."
Source:
The Courier Mailwww.couriermail.com.au
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