China: 'Growth on surface, lots of problems underneath'
It is wrong to idealize the Chinese success, let alone fear Chinese economic dominance in the future. It is not coming, Chairman of Glencore International corp., Simon Murray, told RT.
In his exclusive interview with RT’s Sophie Shevardnadze, British businessman and adventurer Simon Murray reflected on China, where he spent many years, and the future fate of the eurozone. RT: You spend most of your business career in China. Are you one of those who see China as the center of the world’s economic future? Simon Murray: No, I don’t think I do, but I think at the moment China on a comparison basis is certainly doing better than everywhere else. But whether that is going to lead the world forever and ever I do not think so. I do not think that we are honestly going into a Chinese century. No." RT: Then why is this China phobia: China is coming, it is going to swallow us all? SM: Because on a comparison basis, compared to China when I first went there in 1970 when they had absolutely nothing, of course it is very different [now]. China is a manufacturing country: they are benefitting from manufacturing. If you look back in history, in 1900-1910, the Brits, the English were the most prosperous nation in the world, certainly per capita: all on the back of manufacturing. So the industrial revolution [occurred] on the back of coal. In 1900, England was two per cent of the world population producing 40 per cent of the world’s trade. Think about that. America also grew hugely on the back of manufacturing. So, manufacturing is what really leads to prosperity, and the western world has swung away from manufacturing into service industries. That has also had huge dollops of inflation over the years: I am talking about Europe and America. China is going through its industrial revolution equivalent and doing fantastically well, but also feeling the beginnings of inflation; the growing cost base. And over the next 20 years, we may well see Chinese manufacturing moves offshore to places like Cambodia, or Vietnam and maybe Burma and so on. That is the cycle. RT: Is it that simple? Is it all about cheap labor and hard work or there is something else?SM: The hard work that you put in there, people that talk about Asian values of hard work- those are exactly the same: they are Victorian values seen in the UK. Everybody used to work much harder in a way than they do today. People of 16 years old and less, 15 years old, were working in the coal mines. Today everything is much softer and there are human rights and entitlement and the benefits and so on. China does not have those. RT: Which makes you wonder: is it a good thing or not actually? SM: I don’t actually think whether it was a good thing or not. I think that in monetary terms it is amazingly successful. So, China is growing at eight per cent per annum, or whatever the figure is: 7.5-8 per cent per annum. The rest of the world is not doing really anything at all by comparison. Yes they have huge monetary success on the surface but underneath they have lots and lots of problems. RT: Do you believe in the theory “China is getting older faster than it is getting richer”? SM: I do not know that I have heard that phrase that they are getting older rather than the richer. Their problem is also that when you talk about [the] rich, you have also a big divide: the haves and have-nots. China is reported to have 350,000 millionaires. They reportedly have 115 billionaires: that is rather a precise figure. But they have 700 million people who live in the rural areas, central parts of China, who live on four dollars a day, so they are not all getting richer. They are much better off than they were 40 years ago. There is no question about that. The wealth has spread over. Everybody is OK in the sense that they are better off than they were but still big differences, still a long way to go. Twenty million people probably a year move from the rural areas of China into the urban areas looking for jobs. That means China has to find 200 million jobs over the next ten years! That is a pretty big task. China’s cost base is rising. China is now starting things like minimum wage. You have discontent in China. In many villages, there are riots and people are on strike, but we do not see that. If those towns all got up on the same day and rebelled, China would have big problems. So, for China, the most important thing for the Party is stability, keeping these places stable and it is very tough. And they could do it, because the Communist Party is very-very tough.
PS: ‘Germany benefits euro the most’
Speaking of Europe, Simon Murray said that the European Union as we see it now is unlikely to survive the ongoing financial turmoil. RT:Will the eurozone survive as one whole entity? SM: I think there is a good chance that some of the southern countries: Greece, maybe Italy, maybe Spain, Portugal may withdraw from the Euro. The euro benefits the German nation more than anybody else because if we did not have the euro, we would have the Deutsch Mark and we would have the Italian lira. The Deutsche Mark will be here [Murray raises his hand] the lira would be here [Murray lowers his hand]. So, it would be one Mercedes Benz for three Ferraris. What do you think you'd take? Probably the three Ferraris. If the euro goes, Germany will have unemployment at 20 per cent. So they need to keep the euro going. You have to remember that the European community as a collective is solvent but the money is all in Germany and not in the other places. So whether they can keep it as a whole is going to be tough, and it is particularly tough for the Germans because the Germans understand that they need the euro. Watch the full interview for more