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China to be single largest driver of global economic growth

Updated: Mar 3,2016 4:14 PM     Xinhua

John Brumby, former Victorian state premier, is confident that China will continue to be the world’s single largest driver of the economic growth and opportunities “in my life time.”

He made the remarks during an exclusive interview with Xinhua at the reception by the Chinese Embassy in Australia on Canberra Networking Day of the Australia-China Business Council (ACBC), of which Brumby serves as the National President, on March 2.

“If you look at Australia, in the December quarter, the GDP grew quite strongly. And the yearly growth is above estimate. A large part of the drive is China,” he said.

“While it’s true that prices had dropped dramatically in the resources area, in tourism, Chinese spending and arrivals are up by nearly 30 percent. In international education, China is No. 1 in the number of students which is up significantly again. All these areas -- property investment, foreign direct investment, agriculture, exports, dairy exports -- are up dramatically.”

Brumby said that the higher than expected growth rate in Australia can be attributed to a large part to the transition of Chinese economy from an investment-led economy to a consumer-led economy.

“It means more services, more students, more tourists, it means more beef, more mutton, more wool, being exported to China,” he said.

Brumby conceded that China’s growth will slow. “It’s almost impossible to imagine that China could continue to grow at 10 percent per annum.”

But on a Chinese GDP of $10 trillion, if China grows just six percent, it’s adding $600 billion of new economic growth to the world’s economic growth, almost a third of the world’s new economic growth. Comparing to ten years ago, while Chinese economy was 3 trillion with a growth of 10 percent. “So there are more growth and more opportunities.”

“So yes, the New Normal is real, it’s more sustainable. It is slower, but it’s consumer-led, it will have more bumper on the way, but China will remain the single largest driver of the global economic growth and opportunities for my life time.”

Brumby noticed that President Xi Jinping and Premier Li Keqiang had made it very clear including in recent days that if growth in China does continue to slow, there is room for fiscal stimulus.

“We’ve already seen some relaxations in bank lending. So that shows the government is ready to respond and provide some stimulus as we saw in Australia during the Great Financial Crisis. I think that’s a positive sign. There is capacity there. There are plenty of savings, plenty of ability to do that on behalf of China.”

As China’s annual National People’s Congress is about to open shortly, Brumby urged the Australian business to try to understand China’s Five-Year Plan.

“China’s direction is very clear. It is to more sustainable levels of growth. The New Normal will be on a lower level of growth, it is cleaner growth, a stronger emphasis on the environment, cleaning up the air, cleaning up the water, more renewable energy, investing in research and development, and innovation, and also health care.”

“On top of all that is a transition from an investment and infrastructure-led economy to a consumer and services-led economy. That’s in simple terms how I read the new Five-Year Plan.”

As for the occasional anti-Chinese investment sentiment in Australia, Brumby said it is no something new and people need not to be too excited about this.

“I’ve been around long enough to see those things. When I was a young student in the university way back in the 1970s, there was a strong anti-American sentiment about investment ... In the decade that followed, there was the anti-Japanese investment sentiment against Japanese investors. So it’s not something you get excited about.”

He pointed out that Australia is a very big country with a small population, and therefore is always in need of foreign investment, be it from Britain, France, the United States or China.

“We need foreign investment. Otherwise we would be able to develop our resources, our agri-businesses, our other exporting industries.”

Australian National Farmers’ Federation estimates the country need 1 trillion AU dollars ($720 billion) in agriculture to really lift the productivity and the output of exports to China.

So there is a common view from both sides of Australian politics in supporting Chinese foreign direct investment in Australia, he said.