China's economic downturn is of concern to PNG

Radio Australia | ABC

PAPUA NEW GUINEA IS CONCERNED about the state of the Chinese economy as imports in the Asian powerhouse fell in August, prompting anxiety that China may not meet its 2012 growth target of 7.5 per cent.

“Economic activity remains weak with industrial production growth slowing, exports pretty weak,” said Tao Wong, chief China economist with, UBS Securities.

“But there are also positive signs in the sense that the property sector, both sales and construction activity, are rebounding after a number of quarters of slowdown.

“In the meantime, the government has emphasised the increase in public infrastructure spending to help support growth as well,” she said.

In the Pacific, resource-rich Papua New Guinea will be one of the biggest beneficiaries of China’s economic strength. So, if China's economy continues on a downward trend, it stands to be one of the biggest losers.

“We're watching not only China but also to see where Europe is going to see whether its going to have an impact on us,” said Ron Seddon, president of the Port Moresby Chamber of Commerce.

“We're not doing an enormous amount with China at the moment. I know that we're resource-rich here in Papua New Guinea and they're very much a user of resources. But what the Asian Development Bank and other agencies say (is) that short-term we shouldn't be overly concerned.”

According to Wayne Golding of APEC’s Business Advisory Council, “in the sense that not only do we have a financial slowdown but the pricing of commodities has also slowed down. And of course quantitative imports into China of raw materials and finished goods, are also slowing down.

“And, for Papua New Guinea, we're basically an extraction-industry-driven economy, although we have a strong domestic culture base but with the extraction industry showing contraction in price and quantitative deliveries, what we have is also a slowdown in project initiation and of course the amount of money available for exploration.”

Comments

[Adrian Abedi]

Dependency on commodity exports has meant that PNG had to deal with fluctuation and frequently declining prices for exports.

Though PNG and China have forged links through trade and financial flows, political, social and cultural and other competencies.

PNG’s growing integration into the global economy has strong growth, success in reducing poverty, and improved living standards overall. The outlook is bright though many challenges remain.

I believe that China’s interest in PNG has often been protectionism and demands for trade reciprocity, which can overwhelm market in the country.

China’s new preferred mechanism to redefine its relationship with other countries is called “strategic dialogues”. China uses this mechanism to pursue strategic cooperation with PNG.

These mechanisms especially economic partnership to promote China’s mixture of economic diplomacy and cultural and ideological appeals to promote its global and regional influence to balance the uni-polar system the USA have and expand its economy.

This assertive dealing marks a new Chinese approach in desire for a more equal relationship as its power grows as an important goal and which is very dangerous for a resourceful nations like PNG.

We will be used as puppets and beggars. China uses a more moderate means through economic relations as a growing economy to persuade many countries for its own national interest.

Another term is Shanghai Spirit, a Chinese strategic partnership approach as part of its foreign policy to seek equality with the United States by being more active in using strategic alliances with other major powers to improve its position in the world.

It used the policy to indicate a high level, bilateral, cooperative relationship with other countries including PNG.

China uses this strategy to deepen its strategic cooperation to counter its economic, political, social and cultural influence in the Asia-Pacific region. And PNG is one of the countries in which China’s eyes are on.

Looking at the both PNG’s Foreign Policies (Look North Foreign Policy and the selective and engagement Policy). Many of our leaders use these directives as way of bulldozing billions from China while we still owe millions to the World Bank.

Why is that happening? Why there are different kinds of MOU’s signed? What is the main intention? Why is it that so much Asian influence in PNG? Or was it so easily to get loan? Why is that development phase so slow?

Can PNG be able to pay back the financial institutions including China? Will the LNG counter for the loans? Just recently, PNG government borrowed 6 billion from exim bank in China. A famous cote: PNG is a resource-rich but poor”. Whom to blame?

Chinese smile diplomacy have also paved a way for countries like PNG to continually borrow from China. Now the consequences of these loans will be a painful experience for a developing country like PNG.

Higher prices and greater exploitation of resources are resulting from the terms and conditions.

If PNG does not meet the terms and conditions of the loans, I bet you PNG will jeopardize its creditworthiness, exhaust its resources to the foreign sharks and continued access to additional funds and will lead to bankruptcy after all the resources are exhausted.

The Nauru experience will hit up PNG if we are not careful.
It’s sad to know that PNG is already in that shoe.

What will the future be like for the next generation of PNG citizens?