THE chief executive of Rio Tinto, Tom Albanese, has dampened hopes of any fast rebound in the Chinese economy, following meetings with pessimistic Chinese business and economic policy leaders.
Mr Albanese spoke of China’s confluence of challenges after attending a World Economic Forum meeting in Tianjin, where foreign visitors were generally struck by the degree of elite political uncertainty and its impact on policy making.
Mr Albanese told the Herald China was coping with the crisis in its biggest export market, Europe, at the same time it was cleaning up after the infrastructure-led “over-stimulus” that followed the 2008 global financial crisis.
The government-driven investment boom “was good for our business but created some structural imbalances and some inflation which they are now attempting to work out of the system, which led to the drying up in financing and a dry up of property business,” he said.
And he hinted obliquely at the political questions that have been consuming his Chinese counterparts, following seven months of scandal and intrigue including the unexplained two-week disappearance of the president-in-waiting, Xi Jinping.
“You have other things happening in China in that period causing less investor sentiment than you would otherwise have,” Mr Albanese said.
In the corridors of the World Economic Forum, Chinese officials and analysts struck a tone of “despondency and cynicism … while the views of international attendees on China were generally bullish and upbeat,” the Financial Times wrote.
Seven months of political scandal and intrigue have amplified doubts about the leadership’s capability and willingness to tackle deepening structural and governance challenges.
The dents in the Party’s previously shiny armour include the highest-level attempted defection in 40 years, a Politburo member’s wife being convicted of murder, the President’s key power broker reportedly being killed in a high-speed Ferrari crash (with two scantily-clad female passengers) and a president-in-waiting who disappeared for a fortnight.
On Saturday the Vice-President, Xi Jinping, re-appeared in a televised university visit, without any public explanation of why he vanished from view just weeks away from his elevation at the 18th Party Congress.
The director of the China program at the Carter Centre, Liu Yawei, said the failure to set even a date for the all-important congress was unprecedented. “This level of uncertainty and chaos, and the lack of transparency, hurts not only the image of China but it hurts just about everything,” he said.
“Everything is paralysed while they wait for the big thing to happen, nobody wants to take a position on anything, and you have an escalating crisis with Japan and a dispute with the US at same time.” Mr Liu said the uncertainty was sapping the confidence of economic and investment decision makers.
Policy makers are disappointed a series of modest stimulus measures have not gained traction and that inflation appears to have bottomed earlier than expected.
But Mr Albanese’s long-term faith in Chinese domestic demand remains unshaken.
“We continue to see the long-term trends in China and a number of other emerging markets towards greater levels of urbanisation and industrialisation,” he said. “The vastness of these numbers would suggest that over time, more and more of the materials we produce will be consumed and will be in demand.”
Mr Albanese said the iron ore market was “possibly picking up now”, after its shock collapse.