gene sperling at diggers dealers dont write off china just yet 1813172015

Gene Sperling, former economic adviser to the Clinton and Obama administrations, offered hope to the beleaguered Australian mining industry when speaking on the opening day of the Diggers & Dealers mining conference at Kalgoorlie yesterday.

Mr Sperling said he remained confident that China could deliver an economic growth rate of 7 per cent in the foreseeable future, based primarily on his belief that the country would make massive investments in infrastructure even as it shifted out from export-led growth to one oriented towards consumption.

“I have a more optimistic view of their long-term growth than a lot of people, regardless of how the immediate problems over the next quarter or two shake out,” Mr Sperling said, as quoted by The Australian.

Yesterday, data showed that China’s manufacturing activity posted its biggest contraction in two years in July – its fifth straight month of contraction as new orders tapered off.

"I actually don't think things are as bad as people are predicting," Mr Sperling said. "It is kind of remarkable to remember how much growth there was…I don't buy into the hard landing in China, they could easily have 10 to 15 years left of 7 per cent or higher growth."

In January, Mr Sperling was appointed as an advisor to Pacific Investment Management Company (PIMCO), which manages over US$1.52 trillion (AU$2.09 trillion) of assets globally.

In fact, Mr Sperling saw a silver lining for Australian iron ore producers in the wholly underestimated infrastructure needs of China, which he said needs to deliver everything from new transport links and new telecommunications systems to modern underground piping in big cities and airports in its central and western regions. Even though iron ore prices are down to the lowest in six years, the demand for the steel-making material would be supported in the medium-term due to China’s infrastructural priorities, Mr Sperling said, according to Hellenic Shipping News.

Mr Sperling also suggested that metals and iron ore exporters be prepared in the long term to face higher demand from India, which has plans to boost infrastructure spending, as well as add 20 million homes in replacement of its crowded slums.

“India can’t stay this small in terms of demand for the next 10 to 20 years, it’s just impossible,” he said.

The Australian dollar would fall to 70 US cents in the next 6 to 9 months, Mr Sperling said, given the RBA’s inclination towards another interest-rate cut and the US Fed repeatedly signalling higher interest rates.

The devaluation in the Australian dollar should be a tailwind for the mining industry which is struggling to cope with the slump in commodity prices.