Keating's China bank plans 'economic colonisation'
Former Prime Minister Paul Keating this week opened the lid on his China Development Bank (CDB) role and predicted they'll be laughing all the way to the Baltic.
For the first time, Keating gave some insight into his work with what is essentially a tool of the powerful state council under Premier Li Keqiang and the largest Chinese bank for foreign investment, financing cooperation, long-term lending and bond issuance.
He told a gripped audience at the University of Technology, Sydney (UTS) that he met regularly with the Premier to discuss global economic issues and advise the CDB on the way forward. He said his role was to “fundamentally set the context annually, to see which way the Chinese economy is going to go, how the global environment may change and talk about the priorities within the bank itself".
The CDB is a critical piece of fiscal infrastructure for China’s state council. By mid 2015 it recorded a registered capital of RMB 421.248 billion but with its major shareholders including the Ministry of Finance and the National Council for Social Security Fund, the sky would not be any limit.
Blood-letting and panic
Speaking in Sydney at an event organised by former Foreign Minister Bob Carr’s Australia-China Relations Institute (ACRI), Keating said Chinese policymakers not only picked the global financial crisis, they effectively pulled Wall Street and the rest of the world through it.
However, the blood-letting and panic on Wall Street shocked the inner circle.
"It demonstrated to China the days of their belief in the US running the financial system were coming to an end. And it was the financial crisis with Lehmann Brothers, Wall Street which tipped the Chinese to moving away from a policy of 'caution, understatement and reservation', to a policy of 'clarity, assertion and ambition'," he said.
According to Keating the Chinese authorities are now dealing with the over-exertions of their record stimulus.
“So now, in the after-party, they’ve got hangover problems they’re working through and China Development Bank is part of that work. Dismantling over supply, removing massive inventories, killing zombie businesses, deleveraging businesses, transferring those businesses to other countries abroad - working mechanically through the overhang of the crisis," he explained.
Genuine tertiary economy
However, Keating had little doubt China would circumnavigate the current global troughs and eddys to become a genuine tertiary economy with Chinese characteristics, relatively free of US influence and based on native technology, citing the e-commerce platforms of Alipay and Tencent as examples.
"We're going to see a massive shift from state-owned enterprises to private enterprise in China by way of the connectivity of the internet and open sourcing," he said. "These sorts of changes are important on the pathway to the higher-order economy.”
And what will China do when it gets there? According to Keating, the Chinese are not looking out into the pacific at the cost of American hegemony or Japanese interests.
“The Chinese want to tidy up the east - but their real future is in the west," he said. "They want to rebuild the old silk road, the railways and highways up through the ‘Stan countries', through Istanbul, up to the Baltic coast of Poland," he said.
“What we’re going to see is a reasonably obvious economic colonisation of the 50-odd states between the western border of China up to at least western Europe.”