Can Australia cope with China’s mineral needs

BHP Billiton chief executive Marius Kloppers was reported in The Australian on November 19, 2009, as saying that Australia will be unable to finance its resource development alone and that it needs foreign investment to build projects big enough to maintain market share, as China leads a dramatic increase in demand for commodities. Given the present state of the international financial system Asian, rather than Western, institutions are most likely to be the source of such funds.

The Australian Financial Review of November 16, 2009, had put across a similar message with a report that Clive Palmer may become the first Australian with net wealth over $10 billion. Palmer’s rise depends on a Hong Kong float of his mining interests, backed by Chinese markets and investors, meeting brokers’ expectations.

As a sideline to its increasing financial authority over an essentially bankrupt United States, China is becoming central to Australia’s future prosperity and security. Yet, the Australian community remains in denial about the imminent disappearance of many of its past certainties, including the traditional Anglo-American dominance of global finance and mineral commodity trade.

Kloppers has highlighted that the Australian financial sector is unable to sustain the type of investment on which the nation’s future prosperity depends. This is despite the fact that the financial sector continues to support what is widely perceived as an asset bubble in real estate prices, certainly in relation to average incomes.

With the shift in global financial power that was made apparent by the Global Financial Crisis of 2008, Australia will need to reflect deeply on many past practices. Anglo-American banking models do not appear to be adapting well in a global environment that is undergoing rapid transformation.

East Asian administrative and financial behaviour has long been distinctive, placing a major emphasis on using finance for long-term strategic advantage. This has contrasted with the Anglo-American ideological commitment to corporate banking that has no obligation to factor national priorities into its decision-making. As one consequence, Japan Inc and Chinese Sovereign Funds have received a bad press in the English language world.

The growing importance of the East Asian economies in global finance will increasingly demand attention be directed to China’s centrality to an emerging new global order. China is the dominant member of the 13-member East Asian economic and financial grouping, of the Central Asia focused Shanghai Cooperation Organization and of the globally strategic Brazil, Russia, India and China (BRIC) grouping. Together, under Chinese influence, these have the potential to reduce the post-1945 Anglo-American powers that have shaped Australian perceptions to marginalised, bankrupt backwaters.

Difficult as it may be to countenance, Anglo-American powers are in danger of becoming little more than ghosts haunting a decaying and increasingly defunct United Nations system.

The only protection against such a future may prove to be a Chinese disposition to avoid unnecessary turbulence and upheaval in a world undergoing major transformation. Even so, a new world order is taking shape where critical decisions will be more influenced by the traditional wisdom of Confucianism, Daoism and the Yijing than by the rational, abstract beliefs in progress devised by the European Enlightenment and Anglo-American visions of global order.

Few Australians are equipped to understand the types of thinking and strategy that have guided the allocation of resources and the prioritisation of strategies in moving towards the emergence of this new order.

Even more seriously, few Australians have ever been encouraged, either by media or academia, to reflect critically on the nature of the Anglo-American global order that has shaped United Nations institutions, world trade, international financial institutions or global mineral commodity corporations. There is an unquestioned, naïve assumption that new financial centres of power will accept essentially the same structures as put in place in 1945 when America and Britain had the power and authority to define institutions in ways designed to favour their interests.

This myopia is so severe that few, if any, Australians have remarked on the potential for China to meet its longer term needs for mineral resources by new exploration and exploitation of undiscovered resources in the Chinese regions of Xinjiang and Tibet and the vast and adjacent areas of Siberia, Mongolia and Central Asia. These are all within easy, overland reach of the very fast trains now being constructed in China and without need for unloading and reloading at overworked shipping ports.