Is China ready to rev up? – Sir Ganesan Natarajan

China. Our Industry elders never cease to be obsessed by China. Till the other day, they would all voice their concern about the slowdown in the Chinese economy, on how, with the “world’s growth engine” slowing down, the global economy will be sucked into a recess of no return.

Now off course, they have gone to the other extreme. They are now busy discussing how China has given the green light to 60 infrastructure projects worth more than $150 billion, as it looks to energize an economy mired in its worst slowdown in three years, fuelling hopes that the Chinese rebound will lift the global economy from the fourth quarter.

Inevitably, such discussions meander towards India and normally move on two predictable directions. One draws parallels between two great nations and lament how we are busy pursuing vested agenda’s through corrupt mean seven while China leap-frogs ahead. The second more serious discourse tries to understand how China attaining escape velocity will impact the world at large and India in particular. And mind, this discussion takes place in every corner of the world, especially in the industry conferences where I am so often invited as a speaker and the trade delegations that I often lead.

“So Sir Natarajan, how do you see these 60 infrastructure projects impacting India? How will it affect steel prices? Will they lead to a hardening of coke prices globally? Does it auger well for the industry segment that you represent?”

The answers are simple and as a matter of fact I have given them so many times, that I almost rote it out. China pumping resources into its infrastructure sector is good for all. Firstly, it will be consuming its own production thereby leaving it no surplus to dump in the world (and Indian) markets which will lead to the firming up of steel prices and embittered local producers will breathe easy. The tightening of the steel prices will in turn lead to the tightening of coke prices, which too will augur well for the merchant coke makers in India – the industry segment that I represent.

As the coke-steel prices, as moves in Chinese Checkers, firm up on a higher orbit, many of the projects that were stalled due to lack of funds and because falling price realisations had made them almost unviable will be revived, adding fuel to the journey of progress.

I am a firm believer of the multiplier. When resources are pumped into the core sectors of an economy, and china is no exception, it tends to have a cascading effect with circle expanding exponentially over a period of time. Thus, the $150 billion that is about to be infused will have a much bigger effect on the Chinese economy thanks to the multiplier getting into play. Besides as the world economy goes on to become more and more integrated, the effects of massive infusion of capital in one economy will no longer be restricted or confined within its geographical borders. Just as the sub-prime junk crisis has attained critical mass to become a global phenomenon, its reverse will also hold true with positive vibes from China spreading good cheer.

(Sir Ganesan Natarajan is one of the most revered names in the Indian industrial space – part entrepreneur, part visionary he is known for his acumen and ability to grasp the details which has helped him grow his businesses at a scorching rate. Widely travelled and connected to a fault, he is often termed as the face of resurgent India.)