Mining industry development should focus on entities
---Tan Yaling, President of China Forex Investment Research Institute & Senior Researcher of Bank of China, analyzed the disadvantages of over financialization
Source: www.mlr.gov.cn Citation: www.chinamining.com.cn Date: Nov. 5, 2013
The over financialization of mining industry had aroused worries from members of the economics profession.
“Although resources rates had been already included in international finance, we still could not forget that the foundation of finance is from entity economy”. Tan Yaling who is the President of China Forex Investment Research Institute & Senior Researcher of Bank of China said. She reminded members of mining industry in her speech themed on New features and Tendency of International Economic Environment in CHINA MINING 2013.
What we need is investment not speculation. “Developing entities, focusing on entities and making entities stronger are our ways” She said.
Don’t blindly look down upon developed entities
“The theme of CHINA MINING 2013 is opportunities, challenges and development. The ability of identifying is what we need first of all.” Tan Yaling said. The key points are how to identify economic environment and tendency, how to find opportunities and how to capture our reform and development.
Blindly talking about opportunities will lose our sovereignty and our own thoughts, which is very bad for our development. So what’s the new features of international economic environment? It is basically stable in Tan Yaling’s point of view.
Where are the basic elements of stability? Tan Yaling said these elements were the influence and leading force of developed countries. Remarks on the internet were very simple, which were mainly about that the developed countries had already lost its power but the developing countries were in very good condition in terms of the speed of increasing. The economy of developed countries increased by 1%-2% and that of developing countries 4%-14%.
However, Tan Yaling warned that we should remember that developed countries were powerful and strong and developing countries just had scale and speed. Therefore, to analyze international economic environment not just according to growth indicator but also relying on economic power.
“Take America as an example, although the growth indicator of American economy is weak and not as high as China, America is a powerful and strong country.” Tan Yaling said. Economy of America takes up 25% of world economy, but this figure is not very accurate. If taking the advantage of dollars, it will be 70%-80% of world economy.
So, how on earth is American economy? We cannot judge it by remarks of online media. The energy of America is planned by strategy and driven by upgrading and updating. “Economy of America which is familiar to us is very different with real economy of America. In an era of industrialization, which level does America stay in? America is re-industry, whose basics are Nanotechnology, robot technology and shale gas technology.” Tan Yaling said.
Tan Yaling said that China was in the middle of industrialization. What were the features of Chinese industrialization? They were processing, raw material processing, deep processing, which had no comparison with economy of America and development was not in the same level and stage.
“So in this perspective, the stability of economy of America is very important to global economy.” Tan Yaling said. The new energy strategy of America has updated America. America has transformed into oil-producing and oil-exporting country. Its oil external dependence has greatly decreased but Chinese oil external dependence is greatly increasing. So, in the same condition of high-increased oil price, what America is facing is deflation and what China is facing is inflation.
That mining industry had been involved in finance resulted in confusing the primary with secondary
“As we all know, mineral resources were in the field of production originally not in the field of commodities and trade. However, the mineral resources that we are familiar with and keen on are connected with finance and pricing and quotation of dollars” Tan Yaling said.
“What I understood about finance in the past is limited in property. Now we need to further understand international finance. The range of finance had expanded to production from property and then expanded to the whole industry from production. Mineral resources was involved in international finance in 1999." She said.
In Tan’s opinion, the negative effect of over financialization of mining industry has appeared. She took steel industry as an example.
Steel industry was the greatest industry in our country before, but now it appeared excess capacity. It was said that steel industry in our country lacked choice steel products. Tan Yaling thought producing choice steel products was the main direction of steel development. However, we didn’t try our best to do research on steel development but spared a lot of efforts on investment, futures and speculations to get extravagant profits, which obviously has no way out.
“Steel industry should focus on steel, and finance should be auxiliary.” Tan Yaling said. Getting extravagant profits from relying on finance excessively will definitely result in confusingtheprimarywithsecondary.
“We are in an era of excess liquidity. The main features of excess liquidity are heavy investment and crazy speculation. Only wanting to get profits quickly, getting out of national conditions and greatly disobeying international rules are risks to us not opportunities. The most important risk early warning is controlling force. It is vital for a country’s development to have controlling force.” Tan Yaling said.
“How many Chinese investors and entrepreneurs are studying exchange rate? How many of them really understand exchange rate? They are our blind points and weak points, which completely deviate from our expectation of letting RMB go overseas market. From this perspective, it is very important for our development to see currency qualification.” Tan Yaling said.
“There are not enough entities in China, which is our fatal weakness. Lacking the industry chain of entities is our biggest drawback.” Tan Yaling said. She thought our current goal was to develop entities, let quantity and speed become choices or famous brands and change productivity to creativity .Thus, hope and future of China would come.
Tan Yaling also gave some strategic suggestions to delegates about China’s overseas investment rush------
Investment skills: “Chinese Dama” defeated Walt Street? What did Chinese Dama buy was gold in the market? What did Walt Street buy was futures gold? Our gold investment is real gold, but 90% of trade of international investor giants and Walt Street is futures gold.
Investment strategies: We only study price and always want to go bottom fishing when the price drops. Which is more important, price or value or strategy? Chinese investors are very simple. The rich are the investors. What they rely on are wealth, capital and scale. However, investors could be the people without much money in western countries,. What they rely on is technology, profession, strategy and experience.
Investment ability: When China makes investment overseas, it needs investment in its own country. As we all know, medium and small enterprises need investments, countrysides need investment, and everyone’s social security systems needs investments as well. (Li Ping) (Translated by TLRHVC)
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