President Xi Jinping’s push to end reliance on property-led growth has profound implications for the steel industry and is sending out global shockwaves.
The chairman of the world’s largest steel producer, Baowu Steel, had a grim warning for staff when they gathered for the company’s half-yearly meeting this month, one that would reverberate around the world, rattling markets and investors. The Australian government was also taking note.
The ricocheting impact hit home with particular force this week in Australia, where the fortunes of some of the country’s top companies and, even aspects of the federal budget, are highly susceptible to Chinese economic shockwaves. Australia exports more than 80 per cent of its iron ore to China. “And what that’s done is that’s driven pressure on price, which then comes back to our domestic market here in Australia,” he told ABC TV’sShares in Australia’s big iron ore miners have also plunged this year. Shares in BHP, the second-largest company on the Australian stock exchange, have fallen almost 20 per cent, Fortescue Metals shares have dropped almost 39 per cent this year, and Rio Tinto shares have slumped 18 per cent.
Dr Matthew Durban, a former Austrade senior economist and trade commissioner, says China’s economic slowdown is one of structural decline, not a cyclical one. The industrial skyline in Lanzhou, in western China in early August, shows its petrochemical industry is powering away. But a broader malaise in the Chinese economy is sending shockwaves into the Australian market.“Beijing has pledged multiple times to try and do something about consumption, but each time they fail,” Ma says.
The Chinese government’s plan for dragging the country out of its economic rut appears to be one adhering to a theme of continuity, not change.
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