Recently the mainstream media (MSM) has been whipping itself into a frenzy over Prime Minister Kevin Rudd’s apparantly “too cozy” relationship with the Chinese Government.
Firstly, we had Rudd’s conversations in fluent Mandarin with Chinese leaders much to the chagrin of his Liberal Party counterparts who, by comparison, would struggle to order Yum Cha in Haymarket.
Mr Rudd’s familiarity with Chinese culture and in particular his fluency in Manadrin should not be underestimated. Such things are greatly appreciated by the Chinese and will prove a tremendously powerful ingredient in building and strengthening our future ties with this emerging superpower.
Mutual respect, maintaining “face,” diplomacy and the way in which China “does business” are things that Rudd understands.
In contrast, the gobsmacked and floundering Liberals, sought to pick holes in Rudd’s familiarity with the Chinese “Modus Operandi.”
We had reports of the “mysterious Chinese Businesswoman” funding overseas trips – which soon disappeared from the headlines, and more recently fearmongering over China’s military build-up – while Australia prepares to do exactly the same thing.
As America’s economy goes down the toilet, there is little wonder that China is readying itself against any external threat.
Arguably, China will soon emerge as the world’s major economy. Personally, I believe the collapse of the financial sector and the US economy has been the tipping point in this respect.
Reserve Bank Governer Glenn Stevens has also signalled the important role that China will play in rescuing Australia from our economic doldrums.
According to The Australian, the Mr Stevens has refreshed the prospect that traditional safeguards of China and commodity prices will lead Australia’s recovery from recession in the next year.
The bank met the expectations of the financial markets yesterday by leaving interest rates on hold at 3 per cent despite some economists expecting a 25-basis-point cut.
The RBA has cut 425 basis points from the official cash rate since September last year, taking rates from a peak of 7.25 per cent to the current rate, which is a 50-year low.
The majority of economists expect rates to be pared back to 2 per cent before the end of the year, but the RBA indicated future reductions would not necessarily be automatic.
In a statement, RBA governor Glenn Stevens said the Australian economy and the world economy as a whole were front-loaded with stimulus through the co-ordinated rescue package led by the G20.
“The global economy contracted further during the first few months of this year. While the near-term outlook remains weak, there are further signs of stabilisation in several countries,” Mr Stevens said.
“The Chinese economy in particular has picked up speed in recent months and many commodity prices have firmed a little.
“The considerable economic policy stimulus in train in most countries should help contain the downturn and support an eventual recovery.”
The Australian dollar strengthened on the rates decision, given that the move to stay on hold maintains the differential between Australia and US, where the official interest rates are virtually zero.
The currency moved from US73.80c up to US74.20c before it was sold off slightly. At the local close it was at US73.96c.
The interbank futures market is now tipping that rates could stay on hold for the rest of the year.
UBS economist George Tharenou said the RBA’s emphasis on China showed the central bank thought the return of the world economic superpower could propel Australia’s prospects in the next few years.
“We think the RBA is seeing some signs of the outlook improving globally and stability in several places,” he said. “They are placing more weight on China given our trade experience and they are seeing improvement in commodity prices.
“There are signs China is picking up and if there is the same pick-up in commodity prices then that would give a direct boost to the income side of the Australian economy.”
So it seems, that Australia’s future prosperity will once again depend on our relationship with China, and its future growth and development.