Asia Institute Tasmania

Op Ed | Talking Point - Tassie needs more mature, nuanced understanding of China

Summary

Dr Mark Harrison, Senior Lecturer, School of Humanities

Start Date

16th May 2016 12:00am

End Date

16th May 2016 12:00am

Harrison, M, Op-ed - "Talking Point:  Tassie needs more mature, nuanced understanding of China", The Mercury, 16 May 2016.


Talking Point Image

From left, State Growth Minister Matthew Groom, deputy director general of the Department of Commerce in Fujian Chen Shaohe, Premier Will Hodgman and Liu Mengquian from the Fujian Taxation Bureau.


The Tasmanian Government took another business delegation to China last month. The trip by Premier Will Hodgman and local business representatives overlapped with a national delegation led by Prime Minister Malcolm Turnbull, but it delivered specific outcomes in the Tasmania-Fujian Province relationship.

The Premier launched a Tasmania week in Fujian and Tasmanian produce is now being sold in Fujian supermarkets. A new tourism partnership was established.

Emphasising a provincial level relationship in China is an excellent strategy. The State Government is building a partnership on a manageable scale through regular and institutionalised exchanges.

Fujian is a coastal province with an interest in high-quality food, heritage and tourism, all of which it shares with Tasmania. The relationship is weathering the removal of the governor of Fujian province last year on corruption charges.

The latest delegation from Tasmania comes as the Chinese economy is staging a recovery after significant instability last year. This has been visible in Tasmania's trade data. After four years of steady decline, Tasmanian exports to China rose sharply at the end of last year and total 2015 exports almost equalled the highs of 2012.

The spike in exports has been helped by the China-Australia Free Trade Agreement and the fall in the Australian dollar, but is mostly a testament to enterprising Tasmanian businesses that have capitalised on China's more favourable conditions.

Tasmania's positive export performance is good news, but internationally there has been a notable lack of enthusiasm among global finance and monetary institutions to China's renewed economic momentum.

This is because they recognise China is achieving a short-term economic stimulus by reinflating a credit bubble.

Credit growth reached record highs in the first quarter of 2016 and is twice as fast as China's GDP growth. Global financial institutions are concerned China's policy settings take it further from a resolution of its excess debt and industrial overcapacity.

Although it is possible the Chinese economy may rebalance in an orderly way towards consumption and services, the surge of credit finding its way into another real estate bubble, and loss-making state-owned enterprises increase the chances of a disorderly correction.

The last time China released a huge credit surge to accelerate economic growth was 2009-2010. The Chinese Government panicked in response to the Global Financial Crisis and directed credit on an unprecedented scale into state-owned enterprises, local governments and construction. The economy rebounded in a spectacular fashion.

Perhaps the best response to these challenges is to recognise that meaningful engagement with China does not happen by dreaming of a limitless Chinese market in an Asian century.

In Tasmania at that time, local policymakers saw this brief and dramatic period in China's economic history and read it as a story of limitless growth and opportunity into the future. Rather than seeing a short-term and opportunistic economic policy, they saw China at the centre of an Asian Century for Tasmania.

Now, as Tasmanian businesses benefit from another period of short-term, credit-fuelled economic stimulus in China, policymakers have a second chance to develop a more mature and nuanced understanding of China.

Local policymaking could do more to acknowledge that along with the opportunities in China there is significant economic uncertainty.

We would do well to remind ourselves that China sets economic policies and regulations wholly in its own interests, not Tasmania's.

Local policymaking could also adopt a more circumspect tone to the authority of Xi Jinping. Xi's reasserting the authority of the Chinese Communist Party, with himself as its core, is causing tectonic tensions in China's political system.

In practical terms, a more finessed approach means supporting Tasmanian businesses wanting to balance risk through diversification into other markets, especially Japan and South Korea, with whom Australia has free trade deals, and Taiwan, Tasmania's second largest export market.

Perhaps the best response to these challenges is to recognise that meaningful engagement with China does not happen by dreaming of a limitless Chinese market in an Asian century. Rather, it happens in the everyday, in the professional and personal lives of Tasmanians who build relationships with Chinese colleagues, business partners and friends. For every Tasmanian success story in China, there are Chinese consumers, business partners and government officials who appreciate what Tasmania has to offer and who want the relationship to prosper.

As China faces economic and political challenges, hearing from those many people will become more valuable than ever.

Dr Mark Harrison is Senior Lecturer in Chinese Studies at the University of Tasmania.