Speaking last week at the Association of Mining and Exploration Companies (AMEC) National Mining Congress in Perth, financial guru Michael Pascoe recapped China’s phenomenal economic growth to date before declaring the Asian nation was now “treading more carefully with a certain strategic elegance”
Noting various international deals and quoting liberally from Asia Money forecasts, Pascoe said China’s investment in foreign companies and institutions was part of a broader, long-term strategic move to ensure access to emerging resource markets.
He said the challenge for local industry had now shifted from understanding the mechanisms of supply and demand to something more complex.
“We know the demand, that’s the old time story,” he said. “We know the supply … but the means of the supply and procuring it is what becomes very interesting.”
Drawing attention to the increased nervousness of Japan, currently one of Australia’s leading trade partners, he suggested the issue of resources security was the most important one for foreign interest groups, before raising questions over the motives behind ArcelorMittal’s move into Macarthur Coal.
“Is that because they think Macarthur Coal is a promising company that’s going to make a lot of profit? Or is it the first step in making sure they have a supply of coal?” he said.
Fielding concerns over the growing foreign interest in Australian companies, notably from Chinese firms, the panellist took a pragmatic, “go with the flow” approach.
“We are an open economy and we’re doing well ‘cause we’re an open economy,” said Pascoe.
“It is about capitalism, it is about markets. It shouldn’t be about making sure we’ve got it to supply our mills the way Japan did in the early 1940s.”
“China is a phenomenon that’s here to stay,” chimed in China-based South African-born Kobus van der Wath, group manager for Beijing Axis.
He advocated that each foreign deal be assessed on its merits – and take into account factors such as project specifics, governance and safety issues – and said foreign ownership should be welcomed but that there was a need for it to be well managed.
Pascoe supported the sentiment and urged investors and industry to not be afraid of the trend.
“I just see it as part of the evolution of the industry and a good thing,” he said.
“If foreigners have the sense to invest in this fantastic opportunity then I say let’s take the money and make money with it.”
The wide-ranging discussion also addressed other resource and foreign investment issues such as shipping costs (likely to be an ongoing issue, according to Sinosteel’s William Ren), African poverty (the respective governments’ responsibility, pronounced the panel), and China’s pollution and woeful environmental record (improving slowly, said Ren).