Graeme Burton talks to Kobus van der Wath about China’s economic ‘miracle’.
Q1. How long can China’s seemingly inexhaustible demand for resources continue to increase?
China is growing and developing and that’s a long-term phenomenon. Looking back, it has at times grown very rapidly and, perhaps, too rapidly. That has created forces that have supported and underpinned equally rapid demand for resources.
Where we are today and looking ahead, China is re-thinking and re-inventing itself. If you look at the 12th Five-Year Plan, it’s very clear that the focus is starting to shift towards the sustainability of growth, as well as the environment.
As such, we will continue to see China as a very important driver of resource demand. Indeed, there will be certain resources and certain years where we see very rapid growth, but I think it’s in everyone’s interests to see China as a long-term player. If it grows at a more sustainable rate, the growth of resource demand will also be more sustainable.
Q2. Apart from supplying resources, how else can Asia’s other significant economies benefit from China’s economic momentum and increasing prosperity?
China is changing. The nature of its economy is changing. It’s becoming a much higher value-add producer.
It’s becoming a more discerning consumer. It’s starting to have far more focus on services and it is, always remember, an exporter and importer of scale. As such, it is a major importer of raw materials, whether that is energy, metals, minerals or agricultural.
But what’s also true is that it is an exporter of high-end manufacturing and an importer of certain services and technologies. There are phenomenal opportunities derived from China as an importer across the spectrum, and as a potential partner as well – a technology partner, a capital partner and a trade partner. If people see China and Asia holistically, they will see the opportunities in areas other than raw materials.
Q3. How do you see China’s economic strategy evolving as it continues to grow?
It comes from what you could call a low base in the 1970s and there has been tremendous change since then.
Initially, it was the ‘quick wins’. The easy ones were highlighted in the ‘four modernisations’ of the late-1970s and early 1980s – agriculture, industry, the defence sector and technology. All of these were in straightjackets and when they were opened up and liberalised it created a lot of momentum that continues even today.
Going forward, though, they will have to work harder for the gains. There’s already been a great focus on sustainability and the environment, as well as higher valued added segments in the economy. China can’t compete forever on cost. It wants to be an innovator and a knowledge economy. It wasn’t to be big in renewable energies, it wants to be in special materials, it wasn’t to be in cutting-edge information systems and information technology industries.
Q4. What are the key lessons that other aspiring emerging markets in Asia and elsewhere can learn from China?
Leadership, policy and policy implementation all matter. What we see is a lot analysis, there’s a lot of think tanks, research institutions, investment in formulating a view of what would be the right thing for the economy. But they take it further. There’s structures, mechanisms and devices in place. Once they have made a decision, they actually do it. That lesson is applicable to any country, but especially to developing countries. China gets many things right.
When they make a decision and issue a directive, everyone follows it and it is implemented aggressively. On top of that, there’s corruption, which is an unfortunate fact of life in most countries, but Chinese society continues to function. It doesn’t get past a certain threshold.
I’m not saying that there’s no corruption, but society continues to work and be governed effectively. In some countries, corruption can literally erode large public infrastructure programme to the point where nothing actually occurs. Roads don’t get built and the ports are half the size of the plans. China has a political system that lends itself to effective driving of large national-level programmes.
Kobus van der Wath is the Founder and Group Managing Director of The Beijing Axis, a China-focused international advisory firm that operates in four principle areas: Commodities, capital, procurement and strategy.
Van der Wath can be contacted by emailing email@example.com
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