China’s hunger for Australian coal is likely to wane as it moves to a more energy-efficient economy, says Australia’s leading climate change and China expert.
Ross Garnaut, who led the government’s review on climate change and served as ambassador to China in the 1980s, told an economics conference in Melbourne yesterday that China’s ”quite radical” efforts to tackle climate change and an ageing workforce had shown early signs of success - leading to a potentially dramatic impact on Australia’s second most important export earner, coal.
”Coal use [in China] has hardly increased at all despite the growth in the economy,” Professor Garnaut said. ”That’s contributing to a surplus of coal in China and internationally, and putting big downward pressure on prices, with implications for Australia.”
His comments came as a report revealed that not a single Chinese steel mill surveyed by Platts, an influential international energy and metal consultant, had a positive outlook for domestic demand and exports, potentially dampening demand for the fuel further.
Professor Garnaut was upbeat on the prospect of China successfully rebalancing its economy, saying there was no reason why China would not continue to grow ”very rapidly” despite structural changes in the world’s second-largest economy, including a shrinking workforce due to China’s low fertility rate - a byproduct of its one-child policy.
”My guess is that [Chinese economic growth] will settle in the 7 to 8 per cent range, but everyone has to recognise that there is a bit of a risk of overshooting on the downside,” he said.
With China having undergone decades of fast-paced urbanisation, he said the Asian giant’s economy would no longer benefit as much from the ”easy boost” of people moving from rural areas to the cities. But he said rising wages would force labour to be used much more efficiently.
China’s once-huge current account surplus was also shrinking and had the potential to push up the cost of borrowing money, he said.
He predicted China’s current account surplus was likely to fall within the internationally acceptable range of 2 to 3 per cent in the coming years.
A senior fellow at the Brookings Institution, Wing Thye Woo, who also addressed yesterday’s conference, said the obsession with China to unpeg its exchange rate and greatly increase its domestic consumption was misplaced and ”lacked common sense”.
To reform China’s skewed economic model, Mr Woo said, required a much more fundamental change in its political and economic structure, with particular emphasis on private-sector - rather than state-backed - growth.
