If you want a hint at the pace of China’s economic rebound and how it might lift Australia’s economy, look to the skies, says one seasoned Chinese-Australian businessman.
Watch in particular for the expansion of flights between the two nations, especially those run by China Eastern Airlines from Shanghai, China’s financial powerhouse.
“Of China’s ‘gold collar’ people – or high net worth individuals – 80% are from Shanghai,” said the businessman, who requested anonymity given his extensive links to Chinese firms in Australia. “That’s a signal. If China Eastern is not operating many flights, that means trouble.”
The early signs are promising. China Eastern had cut its pre-Covid schedule of 10 weekly flights from Shanghai to Sydney to as few as one, while its 10 runs to Melbourne were suspended entirely – but from 1 February, the Sydney to Shanghai route will be daily, a spokesperson said.
China’s economy, the world’s second largest, is critical for Australia’s fortunes and those of many of its neighbours. China buys about a third of Australia’s exports, equal to those shipped to Japan, South Korea, the US and India combined.
When China reported this week annual GDP growth had slowed to 3% in 2022, its second-worst result since the mid-1970s, the treasurer, Jim Chalmers, declared the slowdown “one of the major economic challenges facing Australia at the start of 2023”.
“The global economy is a volatile place right now and developments in China are a big part of that,” Chalmers said.
Much of that volatility stems from Chinese president Xi Jinping’s abrupt dumping of harsh rolling lockdowns aimed at curbing the spread of Covid. Earlier this month, the government reported 60,000 people had died of Covid in the previous five weeks, although the true figure is likely to be higher.
The Albanese government remains wary that an immediate burst of Chinese economic activity may prove short-lived. A slumping property sector and a shrinking population lurk as speed bumps to anything like the 10% growth rate China generated just over a decade ago.
Global banks such as Morgan Stanley are more optimistic, since recent developments had “far exceeded our expectations”. “The reopening [of China’s borders] happened earlier and faster,” it said in a briefing note on Thursday. “Housing rescue measures [have] turned more coordinated and forceful.”
Besa Deda, the chief economist for Westpac’s business bank, is waiting to see proof of increased activity. The Christmas lull extends to the lunar new year festivities now under way in China, masking activity.
“Uncertainty is really elevated at this point,” Deda says, adding “the dial is turning to nurturing growth”. China’s relatively low inflation rate – 1.8% at 2022’s end – “gives Chinese authorities more room for stimulus if they need to”.
Mike Henry, the chief executive of mining giant BHP, said this week China would be “a stabilising force when it comes to commodity demand” in 2023 at a time when OECD nations were “experiencing economic headwinds”. The country will notch its fifth consecutive year of more than 1bn tonnes of steel, he predicted.
Australian iron ore company Fortescue is similarly “optimistic” about 2023. It’s confident China will continue to pump money into infrastructure and property, justifying the recent run-up in iron ore prices.
Chinese students and property investors are also expected to bolster Australia’s economy.
The University of Melbourne says applications from international students are running 25% higher than 2019’s pre-Covid levels.
“The number of applicants located in China has increased 50% compared to last year, reflecting the easing of the pandemic-related restrictions around the world,” the university’s provost, Nicola Phillips,…
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