Chinese interest in Ireland a portent of things to come

 

WEEKS AFTER THE event, I am still being asked by Chinese journalists and civilians alike: “Why did Xi Jinping go to Ireland?” The answer seems to be a combination of things, ranging from our position in the euro zone to our impending presidency of the EU from next January and, possibly, the fact that Shannon’s free-trade zones provided a model for China’s own version.

But the questioning is becoming more acute in the past few days as the Taoiseach and other senior ministers are in China.

“China is becoming more important and it’s just astonishing the sheer pace of growth,” said Minister for Jobs, Enterprise and Innovation Richard Bruton, who was visiting Hong Kong and Shenzhen before linking

up with the Taoiseach in Shanghai and Beijing.

“Our goal is to introduce Irish companies to the opportunity here. And the Xi Jinping visit was a huge opportunity for Ireland. This is a question of building a relationship.”

China has made numerous vocal pledges to help Ireland and the euro zone in its hour of need, and they have been welcomed by the Government. But now people are wondering if China is maybe heading for a difficult situation itself.

What version of China is Enda Kenny (pictured right with Luo Linquan, the Chinese ambassador to Ireland, in Shanghai last

week), experiencing on his maiden voyage to the world’s fastest-growing major economy? A China facing the prospect of a hard landing or one headed for a soft landing?

It’s a more complicated question than it sounds because many analysts are not too sure about the direction for China right now.

The Shanghai Composite stock index fell more than 1 per cent last week, and the Hang Seng index fell by a similar amount.

There are definitely more bears around than there were before, especially since premier Wen Jiabao said growth would slow to 7.5 per cent this year. Eight per cent is the growth figure usually given as the level below which job creation becomes difficult to guarantee.

Most analysts expect the final out-turn to be higher, possibly by around 8.5 per cent this year. That’s still a marked fall from 9.2 per cent last year. Hard to believe it’s only five years ago that Chinese GDP was expanding at a rate of 14 per cent.

The Chinese manufacturing index, compiled by HSBC, fell to 48.1 in March from 49.6 in February. Figures below 50 indicate that manufacturing is contracting. This came after soft Chinese housing data and a warning from Australian mining, oil and gas company BHP Billiton, which together have stoked concerns about China’s economic outlook in China – which itself has helped cushion the global economy over the past few years.

“The latest People’s Bank of China quarterly survey show that business confidence is improving, household expectations of inflation and future income are stable, and bankers have seen monetary policy being eased. Information in the survey is consistent with our view that economic activity is weak now, but should rebound in the coming months, partly because the government has already eased policy to support growth. We expect new bank lending to return to ‘normal’ in March and Q2, and see limited impact on China from higher oil prices,” said UBS China analyst Wang Tao.

One of the reasons, perhaps, why China is so interested in Ireland is because our situation provides a useful reading on the overall health of the euro zone.

While China will get a lift this year from the recovery in the United States, Europe’s woes are set to be on China’s agenda for some time yet.