So much for dire predictions for iron ore. The spot price for iron ore imported through the northeast Chinese city of Tianjin has risen for an eighth consecutive day, up $US1.50, or 1.2 per cent, to $US131.90 a tonne. The Tianjin iron ore price is now 19 per cent higher than it was May 31 when it was $US110.40. That’s quite a rise given the volume of dire commentary on the Chinese economy, industrial production and the output of steel mills in particular.
Certainly some investors think so. They have driven shares of BHP and Rio Tinto higher since their lows this year. BHP is up 11 per cent since June 25. Yesterday the stock closed at $34.22, up just 0.1 per cent. Rio’s stock has gained 13 per cent since June 25. Yesterday it closed at $56.70, up 1 per cent. The Tianjin spot iron ore price has risen 16 per cent since June 25.
Ever since Deng Xiaoping reversed the ruinous economic policies of Mao Zedong in December 1978 by effectively decreeing capitalism, many have constantly misread China’s economy. From the sceptics of Deng’s orchestrated tear down of the command economy in the early 1980s to contemporary analysts who forecast a financial crisis because of speculative, corrupt lending practices, China has defied the doomsayers because of the energy and dynamism of parts of its leadership and the rapacious money making abilities of its private sector.
Beijing has changed beyond recognition. Its streets and landmarks of today bear little resemblance to the memories of former residents who now find themselves foreigners in their own birthplace. It is a similar story in Shanghai and Guangzhou and almost any other city or town in the world’s second-biggest economy. Some say this orgy of property and infrastructure building is profligate. Others say it is necessary for a country rapidly modernising and now an integral part of the world’s economy.
Until a few years ago a popular saying was that if the US sneezed the rest of the world caught a cold. Now all eyes are on China. It has managed to shrug off real and imagined illness, some at great cost to its long-suffering people, but has ultimately forced those who predicted a dire condition to eat humble pie.