Resource World Magazine

40 www.resourceworld.com A P R I L / M A Y 2 0 1 6 W hen it comes to numbers, China dwarfs most other countries in terms of population, work- force, economics and trade. We pay careful attention to the numbers coming out of China. Its huge economic engine has been the main driver behind global commod- ity prices. When China's economy was hot our resource sector benefited; when China's appetite for commodities cools and shrinks, our resource sector slows. Recently, the numbers and news com- ing out of China have not been so positive: slowing growth, market crashes, massive layoffs, zombie companies, and pollution replace articles focused on China's spec- tacular economic growth. At PDAC, I had an opportunity to sit down with Sandy Chim, President of Century Global Commodities Corp. [CNT- TSX], who had just recently returned from a trip to China. Chim's extensive experi- ence and knowledge of the Chinese market make him uniquely able to interpret the big numbers coming out of China and to put those numbers in perspective. Headlines predict that China's resource industry is set to lay off millions of work- ers. A CBC headline stated, "Massive layoffs coming as China confronts its over- built 'zombie economy.'" In light of this, I asked Chim about the latest number out of China that we are all talking about, 6.5% GDP growth. China is committed to a growth rate of 6.5–7% over the next five years. I asked Chim if this seemed like a reasonable number. It is a num- ber most in the resource sector would be happy with. Chim explained that, "this number is a national target and China's key historical economic numbers like GDP growth have been within the range of forecast by such multi-lateral institutions like the IMF, the World Bank, and OECD. All of China's resources will be geared toward meeting this national goal." This number Chim says is "good guid- ance for companies and sectors that rely on trade with China. Historically, the key top line economic indicators tie well within reasonable range of such international verifiable statistics as its foreign exchange reserve levels, trading statistics with major western economies – from a trade point of view, China has an open economy and is the largest trading partner of many countries." Regarding the predicted layoff of mil- lions of Chinese workers Chim stated that perspective is important. China's work force is huge and it is a workforce that is largely part of the "Planned Economy" that existed before economic reform. There are still many SOEs (state-owned enterprises) though now the national goal is to open up and grow business through innovation and the encouragement of pri- vate enterprise. During the transition from a planned economy to a market economy it is expected that there will be some dis- ruption and any percentage of China's workforce will mean huge numbers when compared proportionately to, for example, Canada. Chim predicted that, "China will implement workforce wide re-training to facilitate the transition." China is a country capable of attaining monumental goals. It isn't a democracy, and for better or worse, when China decides to achieve something, it can move ahead using all of its focused resources. The Silk Road Project is a good example. It was introduced by Chinese President Xi Jinping in 2013 and aims to link East and West and involves many countries. The land route is called China's new Silk Road Economic Belt, the maritime compo- nent is named the Twenty-First Century Maritime Silk Road; the whole has been named One Belt, One Road. A $46 bil- lion in investment in the China-Pakistan economic corridor going all the way to the Sea port of Gwadar was announced a year ago. The project will go a long way towards facilitating China's eco- nomic transition while promising to bring prosperity to Asia and wider access to markets. (See Resource World April/May 2105 issue) How do recent events at the Shanghai Stock Exchange fit into the big picture? Chim said that in "1990, the Shanghai Stock Exchange was founded and the concept of a stock exchange was new in China. In fact, it is still an emerging mar- ket with limited listings. This makes for volatility." "The Chinese are very good savers," says Chim. "They are interested in invest- ing and once people develop and practice their analytical investment abilities and China by the numbers by Kathrine Moore Sandy Chim, President & CEO of Century Global Commodities Corp. Photo Courtesy of Century Global Commodities Corp.

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