China’s “precarious” debt trajectory and its slowing population growth mean it could be eclipsed by India as the world’s most important buyer of minerals in a decade, according to Dambisa Moyo, the global investor and economist.
Moyo, who was speaking at the Diggers & Dealers mining conference in Kalgoorlie in Western Australia, warned that China’s debt and demographic challenges would become “incredibly problematic over the next 10 years”.
She said those structural challenges would intensify China’s “struggle to manage a lot of their policy initiatives from the centre in terms of their political approach”.
That could have wider implications for the Chinese economy but also the world’s mineral and resources companies — many of them Australian — that rely on demand from Beijing for their own growth, she said.
“The real story of emergence and product mix, thinking about the energy stack and about minerals, does become India,” said Moyo, who is a board member of Chevron, 3M and Condé Nast.
Citing UN figures, Moyo said India’s population was set to surpass China’s this year which would have “material consequences” for how global mineral resources are allocated.
China has been criticised for reverting to debt-fuelled and wasteful spending to stem its economic slowdown.
Roland Rajah, an economist with the Lowy Institute think-tank, said he was pessimistic about China’s growth and although India’s economy was a fraction of the size of China’s, there was no anticipation it would slow down.
“Indian demand for coal and renewable energy will mean a lot for Australia,” he said. “India will probably grow much faster than China but China is still pretty big.”
Moyo, who is also a UK government adviser and a former Barclays board member, expects China to adopt “a more aggressive agenda” this year to kick-start slowing growth that would stimulate greater investment in resources.
But she said it was unlikely that China’s economic growth would reach the high rates of the past and estimated annual growth of 4 per cent. Beijing has set a target of about 5.5 per cent annual growth for 2022, a three-decade low.
In the second quarter of this year, Chinese growth slowed to 0.4 per cent from 4.8 per cent in the previous three months. “They definitely have a lot of headwinds,” Moyo said.
Her expectation of a rise in resource spending echoed the outlook of several mining companies that are banking on the world’s second-largest economy to take advantage of its relatively low inflation levels to increase investment.
Jakob Stausholm, chief executive of Rio Tinto, said last week that China’s approach to managing its economy bolstered his confidence in his company’s perspective. “The fact that China is actually not fighting inflation and we know that they have a deep desire to grow their economy,” he said.
Moyo said she would continue to invest in China in the short-term but the structural problems in the country’s economy clouded the long-term opportunities. “I think the story becomes very complicated after 10 years,” she said.