Conference program

November 23, 2011
Session 4
2:20 p.m.

China, a rich country but a poor people: The sustaining power for the global steel industry
Sandy Chim (Century Iron Mines)

With over US$5 trillion dollars of GDP, China has been the second largest economy in the world and growing. With annual growth rates of around 8% to 10%, many expect China will be one day, in the not too distant future, the largest economy surpassing the USA. From only US$216 million GDP in 1978 when its economic reform started, China managed to grow spectacularly by 25 times in about three decades. This solid growth over the years has created tremendous wealth for the nation. If we choose to show how well the country has done by just one number, it can be best understood by its foreign exchange reserve of over US$3 trillion today, the largest in the world and in history by far so far.

It has been that economic momentum from just one country (with China’s steel production constituting some 45% of total international market) that is propelling this current super cycle of iron ore so much so that even in the face of global financial crisis both the prices and volumes of seaborne iron ore trade broke record a few times. It is indisputable that over the last decade, China contributed much to this cycle. The inevitable question is whether China can still drive the market after already so much growth.

The answer to that question can best be seen by how much the average Chinese can still improve their income and living standard. Even at over US$5 trillion GDP, with a population of 1.3 billion, China is still a relatively poor people at US$4,000 GDP per capita. If the few millionaires are taken out of this average, the number is even lower. The average Chinese income will grow substantially for sure. A good benchmark of US$17,000 GDP per capita of South Korea is a good comparable target of what China can achieve. At the South Korean level, it will take China to growth 8% for about 20 years. The current geo-political system that took it here seems to be stable to provide the condition for it to improve its poor population significantly. In short, the constant strive for better income and living standard of the Chinese population is the engine of the global steel industry and economy at large.