China now mining in Australia

The Chinese government are no longer satisfied with buying iron ore and coal from Australian miningcompanies, Rio Tinto and BHP Billiton. China is now funding its own operations on Australian soil by leasing land in the Pilbara region in the north-west of Australia. China expects to mine at least 2bn tonnes of ore from this region in the next 25 years and with it comes royalities and taxes for the Australian economy. It seems that China is the only country that is able to invest such large amounts of money in the mining industry and infrastructure – they are currently funding a port with a 1.6km-long breakwater protruding into the Indian Ocean.

Resource Curse
But as I have mentioned in previous posts there is the resource curse issue and here are indicators that economically the Australians should be worried:

* the windfall from mineral exports has strengthened the Aus$ which has made manufacturing exports uncompetitive.
* In Perth restaurants and farms are struggling to find labour as unskilled workers are attracted to the high earning potential of the remote mines- average yearly wage is Aus$112,000. A truck driver can earn more than a surgeon.

Economists also refer to this as the Dutch Disease which makes reference to Holland and the discovery of vast quantities of natural gas during the 1960s in that country’s portion of the North Sea. The subsequent years saw the Dutch manufacturing sector decline as the gas industry developed. The major problem with the reliance on oil (minerals in the case of Australia) is that if the natural resource begins to run out or if there is a downturn in prices, once competitive manufacturing industries find it extremely difficult to return to an environment of profitability.

Below is a clip about China’s demand for Australian minerals taken from AlJazeera early last year.

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