China has been the world’s largest economy for most of the past two millennia. Its economic performance through the 19th to mid-20th centuries was an aberration.
This period has been called the “great divergence” and was a time of increasing European dominance. Various reasons have been given for this, including technology, colonisation and worldwide trade.
For many years, China has been the world’s largest political union and a world leader in the development of technology.
For 500 years, from the 10th century to the 15th, it was the largest economy in size and per capita income.
This is elegantly shown in the accompanying charts, provided courtesy of the late professor Angus Maddison, of the University of Groningen, the Netherlands.
China is well known for inventing the compass, gunpowder, paper and printing. But it was responsible for many more, lesser-known inventions and discoveries.
For example, China was the first to make alcoholic beverages and cookware. A few further examples relevant to the resources sector include:
The world’s oldest discovered blast furnaces, for making iron, are in China, dated at second to third century BC. However, cast iron weapons have been found in China that date as early as the fifth century BC;
During the Han Dynasty (202-220BC), the Chinese developed bore hole drilling techniques capable of depths to 600m;
The famous “terracotta army”, dated at 201BC, has bronze spear tips coated in chromium – chromium was not used in Europe until the 16th century AD;
Coke was used in metallurgical furnaces during the Song Dynasty (960-1279AD), while natural gas from bore holes was used as fuel as early as the fourth century BC;
- The seismometer was invented by Zhang Heng in 132AD.
It is little surprise that China has been dominant for so long. It is an extremely large and politically stable population with very advanced technology.
China was overtaken first by Europe, in the mid-19th century, and then by the United States, at the start of the 20th century, as the world’s largest economy. Both of these economies are in decline, while China is in the ascendant.
What you should take away from these facts is China’s growth will continue, although perhaps at a more muted pace than in recent times.
It has a long history or being the world’s biggest economy and will probably become so again.
Investors should ensure they are well placed to take rapid advantage of any improvement in conditions on the other side of the downturn in the Australian resource sector.
The main drivers will be the Chinese economy and the Australian dollar.
This article was first published on the resource sector investment commentary website marketcap.com.au.