Falling commodity prices needed for Chinese economic miracle

DARWIN - Global prices for commodities, such as iron ore, need to come down a little bit so that China can continue its economic miracle, according to Australian Minister for Resources and Energy Gary Gray.

Gray made the remarks on Tuesday at an exclusive interview with Xinhua during the Australia-China Minerals Investment Summit held in Darwin.

"Global prices (for commodities) will be set by economic activities in China. Our regional prices will be influenced more by China than by any other countries," he said.

Gray said that China's economic success is important to all of us in this hemisphere. "So we need to see continued buoyant prices but in order to allow China to grow as it needs to grow, we do need those prices to come down a little bit and the volume to increase a lot so that China can continue its economic miracle and so our region can benefit from that," he said.

Gray, however, admitted that commodity prices are set by global market but what the Australian government can do is to increase its production volume.

Talking about South Australia and the Northern Territory, which hosted the investment forum aiming at attracting more Chinese investments, Gray said these two states and territories have great potentials in a lot of minerals, including iron ore, hydro-carbons, uranium, copper, and aluminum.

"These two states are significant resource areas that as yet have not had the investors' attention in the scale that is seen in Western Australia in iron ore and in Queensland in coal," Gray said.

He said the forum, jointly held by the two governments, is a good chance for Chinese investors to look at opportunities in the two states and understand them.

Gray admitted that people may be surprised at the lack of development in the Northern Territory and in the northern South Australia.

But he also quoted that these two states have one of the oldest trading relationships with China that Australia had with the very first concentrates in lead and silver being exported from the Brokenhill Company to China in 1880.

Commenting on his predecessor Martin Ferguson's remarks last year about Australia's resources boom reaching its peak, Gray said the reality is that a number of the country's big resource investments are currently passing through the phase of construction and moving to production.

"It's always the case that those big investments would become producing investments instead of simply mines under construction," he said.

Gray said that the large employment is during construction not during operation. "So oftentimes people get the wrong idea of the transformed economic circumstances that surround the heightened economic activity of investment as oppose to a sustained cashflow of income that come from the operation of resource projects," he said.

Gray also emphasized the investment opportunities in the horticulture section in the two states.

"I think the future is in protein and fiber production, fiber for food and also fiber for industrial processing," Gray said.

"I see the growth in our northern cattle herds has having strong connections to China and Chinese food demand. We are a part of the world that can grow hand-in-glove with China with confidence and with great capability that Chinese investment brings. It's a good relationship, a good friendship, the one that can benefit all parties," Gray added.

When asked whether a debate like the one around Chinese private company Shandong Ruyi taking over Australia's largest cotton field, Cubbie Station, would scare Chinese investors away, Gray said it would be silly to suggest that from time to time there aren't debate around these issues.

"But our friendship and the quality of the relationship between China and Australia is real and the win-win side of that is important to both our countries," Gray said.