In the first three months of 2011 China’s economy did what it has done with monotonous regularity for decades – it grew quickly at 9.7%. The World Bank forecasts that in 2011 China’s economy will expand by 9.3%. If this is true it will be the first time in three decades that growth has slipped below double digits. The World Bank forecasts lower growth again of 8.7% in 2012. Decades of growth have had a massive impact on the Chinese economy – not least the increase in personal wealth and national demand for energy, commodities and raw materials which have made China Australia’s number one trade partner.

Inflationary Signs

If sustaining high growth is not the problem for China, then inflation is. In first quarter 2012 China’s inflation rate skipped ahead to 5.2% - up from 4.7% at the end of 2010. The inflation rate is above the Chinese government’s annual target of 4%. Rising food prices have been the major contributor, propelled by global price rises for commodities. In March 2011 food prices jumped 12% compared to March 2010. On the ground, inflation may be much higher than the ‘official’ figures suggest.

One group of critics warn that the inflationary pressures building in China (helped by US policy) are extreme. Of particular concern is the argument that rapid rises in Chinese property and real estate prices have created a massive bubble which will inevitably lead to US style sub-prime meltdown. However more conservative commentators – notably the World Bank – although seeing inflation and rising property prices as a concern – predicts inflation will moderate throughout the rest of the year. The World Bank says that food prices are slowing and core inflation appears to be in check. The Bank does warn however that if the economic brakes are pressed too hard a sharp correction to the property market could cause problems.

Most analysts trace the origins of inflationary pressures in the Chinese economy to the massive stimulus package by Beijing in the wake of the GFC two years ago. Hot money first went into the stock market – which suffered a major correction in mid 2010. The second wave of hot money went into real estate. According to figures cited by Bloomberg lending reached record levels of $USD2.7 trillion in 2009-2010. There are fears the property sector will be next to crash.  If it does, China’s banking and financial system will be exposed to massive bad debts.

The government has adopted a number of measures to cool the national economy and property prices in particular. Starting in mid 2010 the reserving levels of financial institutions were lifted, interest rates have been lifted and increases made to the size of down payments for purchasing houses and apartments.  In key cities such as Shanghai and Chongqing further regulations have been adopted to restrict the purchase of second and third residential properties by individual buyers flocking to the red hot property market. International commentators are urging the Chinese government to allow the Yuan to appreciate as another lever to control domestic inflation.

(Sources Bloomberg News April 15 2011, Forbes May 1 2011, World Bank Quarterly Report on Chinese Economy 2011,

Impact on Australia

As we hear on a daily basis, what happens to the Chinese economy has profound economic consequences for Australia. In his first speech as head of Treasury, Martin Parkinson warned that any serious dampening of domestic demand in China (which could be the result of Beijing’s anti-inflation policy) could reduce demand for Australian commodity exports – which could in turn negatively impact the overall health of the Australian economy.  (The Australian 18 May 2011)

The most serious consequence of a Chinese slowdown might be to derail the current Federal government’s projections to return the Federal budget to surplus – one of the central planks of its re-election platform. Treasurer Wayne Swan has acknowledged that current budget surplus projections are strongly linked to continued strong growth in China and the region. In reply to the government’s 2011 budget, Australian opposition leader Tony Abbott argued that the budget weakness is that it is too reliant on the Chinese economic boom continuing. Putting aside the partisan cut and thrust of the budget debate, one thing is beyond dispute – the health of the Chinese economy is crucial to Australia.

The mainstream economic consensus in Australia suggests confidence in continued strong growth and demand in the Chinese economy.  Despite Treasury Secretary Martin Parkinson’s words of caution, his department (Treasury) forecasts strong Chinese growth of 9.5% in 2011 and 9% in 2012.

Australia and China 2.0 – A new phase of mutual economic engagement

Foreign Minister and former PM Kevin Rudd has put China front and centre of Australian policy thinking. Beginning in April he used his delivery of the 70^th annual G E Morrison lecture at ANU to announce that the government would be funding a major new research and education institute at ANU called the Australian Centre on China and the world. A few weeks later Rudd delivered a major policy address on China in Guangzhou In the speech – described on the front page of the Australian Financial Review as visionary – the former Prime Minister focussed not merely on the standard narration of the extraordinary changes in China since the reform process began in 1978 and the usual array of statistics and data but what lies ahead for Australia and the region in the next thirty years. Rudd chose to call this positioning of Australia in anticipation of the rise of China “Australia-China 2.0” – what Rudd defined as “a new phase of mutual economic engagement.”

Rudd observed that although there is a debate about when China will overtake the US economy in terms of absolute size “ what isn’t in debate is that on current projections China’s economy is likely to be the largest in the world before the end of the third decade of this century.” China’s growth has already created massive demand for Australian fuels and minerals, which Rudd noted accounted for over 80% of merchandise exports to China in 2010.

The Australian Foreign Minister highlighted some of the major economic shifts occurring in China, which Australian government and business must be ready to respond to. These include; China’s major focus on addressing the environmental cost of rapid growth and changing its growth model to prioritise the quality of growth over the quantity of growth; a rapid increase in spending on Research and Development to move the Chinese economy higher up the value chain; a new wave of growth coming from second tier cities and inland regions (Rudd cited growth rates of almost 20% in Inner Mongolia) and perhaps the most important shift of all, the Chinese government’s determination to reduce economic reliance on an export led growth model to increased domestic consumption. This latter focus will not only address significant problems with economic and social inequalities in China, but also help cushion the Chinese economy against major shocks in the global economic system. After listing the array of sectors where Australia can match the emerging new trends in China -  including financial services, education, environment, international tourism and offshore investment – Rudd concluded that success “ultimately depends on business”, requiring the Australian corporate community be prepared for the changes coming from China’s new economic development model. Among the suggestions to business from Rudd were employing bilingual Australians to work in the China market, and having an active presence in the regions and emerging second tier cities.

If taken up by Australian business, Rudd’s recommendations will require major investment in recruiting staff with the range of language, cultural and in-market expertise needed for new sectors and locations. Working in the diverse inland regions and less familiar second tier cities will pose challenges even for well established businesses, more used to the relatively developed infrastructure and now familiar business environment of cities like Guangzhou, Beijing, Shanghai or Tianjin. It will also require new commitment of time and resources to establish a physical presence in the new areas and begin to acquire the critical local experience and local networks.

(Source “Australia-China 2.0- the next stage in our economic partnership” Transcript of speech by Australian Foreign Minister Kevin Rudd at Guangdong University of Foreign Studies 22 May 2011)

• Home
• Chinese Translating
  • Chinese Translation What
  • Chinese Translation Quality System
  • Chinese Legal Translation
  • Special Subjects
  • Chinese Translation Guidance
  • Chinese Document Translation
  • 中英文笔译
  • Chinese Desktop Publishing
• Chinese Interpreting
  • Chinese Interpreting Events
  • Chinese Interpreting Explained
  • Mandarin Conference Interpreting
  • Mandarin Interpreting Guidance
• Chinese Business Cards
  • Chinese business card choices
  • Names in Chinese
  • Chinese Business card designs
  • Order Chinese Business Cards
• Why Choose Chin?
  • About Chinese
  • Free Publications
  • FAQ
• Social & News
  • BLOG
  • News & Events
  • Twitter
• Testimonials
• Bloopers
• Contact Us