According to global investor and economist Dambisa Moyo, China’s “precarious” debt trajectory and its slowing population growth mean that India could assume over a decade as the world’s most important buyer of minerals.
Moyo, who was speaking at the Diggers and Dealers Mining Conference in Kalgoorlie, 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 from the Center to manage a lot of its policy initiatives in terms of its political outlook”.
That could have wide-ranging implications for the Chinese economy, but the world’s mineral and resource companies – many of them Australian – depend on Beijing’s demand for their growth, she said.
Moyo, who is a board member of Chevron, 3M and Condé Nast, said, “The real story of evolution and product mix, thinking about the energy stack and minerals, becomes India.”
Citing UN data, Moyo said India’s population will overtake China this year, which will have “material consequences” for the allocation of global mineral resources, she said.
China has been criticized for returning to debt-fuelled and wasteful spending to stem the economic slowdown.
Roland Raja, an economist at the Lowy Institute think-tank, said he was pessimistic about China’s growth and that although India’s economy was a fraction of China’s size, there was no expectation that it would slow down.
“India’s demand for coal and renewable energy will mean a lot to Australia,” he said. “India will probably grow a lot faster than China but China is still huge,” he said.
Moyo, who is also an adviser to the UK government and a former Barclays board member, expects China to adopt a “more aggressive agenda” this year to encourage more investment in resources to slow growth.
But Moyo said it is unlikely that China’s economic growth will reach the high rates of the past and projected annual growth of 4 percent. Beijing has set a target of about 5.5 percent annual growth for 2022, a three-decade low.
In the second quarter of this year, China’s growth rate slowed to 0.4 percent from 4.8 percent in the previous three months. “They definitely have a lot of headwinds,” Moyo said.
His expectation of increased resource spending echoed the view of many mining companies that are banking on the world’s second-largest economy to take advantage of relatively low inflation levels to increase investment.
Rio Tinto chief executive Jacob Stosholm said last week that his approach to managing China’s economy has boosted his confidence in his company’s perspective. “The fact is that China is not really fighting inflation and we know that they have a deep desire to grow their economy,” he said.
Moyo said it would continue to invest in China in the short term, but structural problems in the country’s economy stifled long-term opportunities. “I think the story gets too complicated after 10 years,” she said.