China hungry despite jitters

The world’s eyes are on China. Where just a short time ago, it was a matter of ensuring that we maximise our trade with China, that we don’t miss opportunities, today we watch to see how they manage an economy under pressure in order that we maintain our faith.

Tasmanian farmers have as much of an interest or stake in that economic management as anyone else. After all, we look to China for our own growth towards a target $10 billion in annual agricultural production by 2050.

To put China’s real potential in perspective, according to the U.S. Department of Agriculture’s latest macroeconomic projections, by the year 2030 China will have all but eclipsed the US in terms of the size of its gross domestic product (GDP).

The US currently accounts for 23 per cent of the world economy. By 2030 that will be down to 20 per cent and China will be breathing down its neck. China’s GDP will have doubled in that time.

Already China is responsible for almost 60 per cent of world imports of soybeans, 60 per cent of iron ore, 32 per cent of integrated circuits, 31 per cent of copper and 14 per cent of all oil imports.

So, when we see its economic growth slowing, not meeting China’s high expectations, when we see their stock markets plunge, what are we supposed to make of it?

“China’s sharemarket may be in free fall; but its economy is not.”

That appears to be the general view of China watchers, as expressed by Professor James Laurenceson of the Australia-China Relations Institute at the University of Technology in Sydney.

“Big fluctuations in the sharemarket have never reflected the state of the broader economy,” he wrote online in The Conversation this week.

“That was true when the Shanghai Composite Index surged by 130 per cent between last August and this June. And it has remained true as it has fallen by nearly 40 per cent since then.”

And that was only at the beginning of the week.

The theory is that demand will remain high for agricultural imports because of the very size of the economy and that growth expectation towards 2030. Chinese parents will still want high quality food for their children; will still want the milk that we can supply.

Meanwhile, it is sobering to watch how the Chinese manage their economy when, quite suddenly, they are faced with a dynamic situation in consumer and trader confidence.

What to make of it?

The golden lesson for everyone is diversification. Australian investors have been shown the wisdom of investing across investment sectors rather putting all their (nest) eggs in one basket.

As farmers, we appreciate the wisdom of diversifying our production so that we do not become slaves to one commodity that will make us or break us.

Similarly, while our future may appear to be largely in the hands of Chinese consumers, we have to maintain a broader vision, a wide-angle lens on all the possibilities for selling what we produce.

That is the lesson in all this upheaval.

By the way, following my concerns in last week’s column about increasing crime and vandalism in Tasmania’s country areas, I shall be meeting Police Minister Rene Hidding today on behalf of the TFGA.

THIS ARTICLE FIRST APPEARED IN THE TAS COUNTRY ON 28 AUGUST 2015.
TFGA president Wayne Johnston