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Speaker 1: My name is Lily Maddon and I'm a proud Arunda

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Speaker 1: Bunjelung Calcoltin woman from Gadighl Country. The Daily oz acknowledges

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Speaker 1: that this podcast is recorded on the lands of the

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Speaker 1: Gadighl people and pays respect to all Aboriginal and Torres

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Speaker 1: Straight Island and nations. We pay our respects to the

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Speaker 1: first peoples of these countries, both past and present.

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Speaker 2: Good morning and welcome to the Daily os. It's Friday,

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Speaker 2: the tenth of November. I'm Zara, I'm Sam. We've spoken

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Speaker 2: a lot on this podcast about how Australia and in

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Speaker 2: fact much of the world, is battling inflation, but in

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Speaker 2: China it's a different story. China's one is at a

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Speaker 2: sixteen year low and the country appears to be experiencing deflation.

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Speaker 1: China's real estate industry is collapsing in slow motion.

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Speaker 2: The main reason is that there is no money.

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Speaker 3: The state does not half any money left.

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Speaker 2: To explain what's happening in China and how worried we

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Speaker 2: should be about it here in Australia, journalist Tom Crowley

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Speaker 2: is going to be joining us in today's Deep Dive.

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Speaker 3: I do think we need to soak up every single

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Speaker 3: word of this deep dive. Zara, I want everyone to

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Speaker 3: know that this is actually Tom's last time on the

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Speaker 3: podcast before he leaves TDA for an exciting new adventure.

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Speaker 2: We're going to have a chat about it in the

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Speaker 2: deep Dive. But first Sam, what's making headlines.

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Speaker 3: The one hundred and eighteen days of industrial action have

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Speaker 3: come to an end and the Hollywood Actors strike is

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Speaker 3: now over SAG after the union representing the actors reached

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Speaker 3: a tentative agreement with the Hollywood Studios. SAG members will

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Speaker 3: now vote on the deal before it's officially confirmed. The

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Speaker 3: historic strike was the first Hollywood Actors strike in forty

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Speaker 3: three years. We've done a deep dive on this strike

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Speaker 3: the links in the show notes.

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Speaker 2: The federal government has pledged three hundred and fifty million

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Speaker 2: dollars to support the impacts of climate change in the Pacific.

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Speaker 2: PM Anthony Albanezi made the commitment following a discussion at

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Speaker 2: the Pacific Islands Forum on Thursday morning. Further commitments from

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Speaker 2: the government to support Pacific islands, especially vulnerable to climate change,

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Speaker 2: are expected today.

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Speaker 3: Airbnb owners in Wa will be offered an incentive payment

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Speaker 3: of up to ten thousand dollars to transition their property

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Speaker 3: to a long term rental, owners will need to have

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Speaker 3: had their property listed on a short stay platform such

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Speaker 3: as Airbnb or Stays within the past six weeks and

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Speaker 3: be willing to provide a twelvemonth lease to new tenants.

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Speaker 3: Maximum rent prices are also going to apply and the

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Speaker 3: measure is aimed at improving housing affordability and availability across

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Speaker 3: the state.

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Speaker 2: And the good news the AFLW Final Series starts tomorrow.

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Speaker 2: Minor premiers Adelaide will begin their finals campaign against Brisbane

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Speaker 2: on Saturday afternoon before the Gold Coast Sun's host Sydney

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Speaker 2: in the evening Go Sydney. Defending champions Melbourne will play

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Speaker 2: the North Melbourn Kangaroos on Sunday afternoon.

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Speaker 3: Good morning Tom, for the very last time, Welcome to

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Speaker 3: the podcast. Good to be Sam, so today to send you.

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Speaker 3: We're going to talk about your favorite topic in the

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Speaker 3: whole wide world, the economy. But we're not going to

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Speaker 3: talk about Australia's economy. We're going to take a look

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Speaker 3: at China. What do we need to know?

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Speaker 4: What else could it have been for the last time Sam,

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Speaker 4: other than the economy. So the reason I want to

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Speaker 4: focus on China. It's actually one that I've been thinking

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Speaker 4: about doing on the pod for a while now. China,

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Speaker 4: for really our entire lives, sam has been a good

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Speaker 4: news story. It's been this enormous economic boom. China's been

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Speaker 4: this emerging powerhouse. It's reshaped the world. It's had huge

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Speaker 4: impacts for Australia. But in the last little while that

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Speaker 4: story has been changing, and China might be standing on

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Speaker 4: the edge of a bit of a cliff at the moment,

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Speaker 4: which would also have very significant impacts on Australia. So

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Speaker 4: I think it's an interesting topic. There's a lot to it,

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Speaker 4: and I'm keen to unpack it with you.

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Speaker 3: Well, before we talk about China in twenty twenty three,

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Speaker 3: perhaps it will be helpful to go back a couple

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Speaker 3: of decades and kind of tell the story of China

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Speaker 3: in recent history. What is that story?

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Speaker 4: Ninety China is a big country, a lot of people,

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Speaker 4: but those people are mostly very poor. They mostly live

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Speaker 4: in rural areas, and most of China's economy is basically agriculture.

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Speaker 4: That starts to change, and it changes very dramatically. China

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Speaker 4: goes through this process of industrialization the same sort of

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Speaker 4: process that many countries, including Australia, have gone through, but

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Speaker 4: China does it just on this whole different scale. And

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Speaker 4: so over the course of twenty or thirty years, the

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Speaker 4: standard of living changes, but the whole fabric of China changes.

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Speaker 4: So cities are erected out of nothing. These cities that

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Speaker 4: didn't even exist get built. In this enormous construction boom.

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Speaker 4: You have tens, even hundreds of millions of people who

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Speaker 4: move from being rural farm workers to moving to cities,

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Speaker 4: into industrial jobs and into other jobs. Their education rates increase.

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Speaker 4: China completely transforms into the country we know now, which

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Speaker 4: is one of the largest countries by population but is

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Speaker 4: also the second largest economy in the world.

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Speaker 1: World.

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Speaker 4: It's a boom, as I mentioned earlier, which has been

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Speaker 4: very beneficial for Australia, which has sold a whole lot

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Speaker 4: of things, including for example, iron, ore and steel to.

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Speaker 3: The steel that makes those cities has been from Australia.

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Speaker 4: Yeah, sometimes people talk about Australia maybe a little disparagingly,

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Speaker 4: is China's quarry. So it's been an enormous thing for us,

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Speaker 4: but it has it's changed the fabric of the world.

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Speaker 4: That's a story that has been going for decades, but

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Speaker 4: now it looks like a different story is emerging.

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Speaker 3: And what would you put that change of narrative down to.

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Speaker 4: Well, I think, like all good crises, Sam, it's a

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Speaker 4: few things that have come together at once. So first

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Speaker 4: I should say I'm talking about China being at the

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Speaker 4: brink of a cliff here. It's too early to know

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Speaker 4: exactly what's going to happen. It's possible that this just

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Speaker 4: could be a bit of a bump on the road

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Speaker 4: for China. We shouldn't overstate things, but there are a

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Speaker 4: few things happening at once, which together are reasons for concern.

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Speaker 4: And the first one I think when we talk about

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Speaker 4: economic booms, we often talk about a cycle between a

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Speaker 4: boom and a bust. After the boom, there comes a

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Speaker 4: correction and things come back down again. And sometimes that's

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Speaker 4: because in a boom, you get a bit over exuberant,

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Speaker 4: you're growing at a pace that's not sustainable. And that's

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Speaker 4: what we're seeing in China's housing market, in particular, after

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Speaker 4: this period of decades of construction of houses of cities,

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Speaker 4: we're starting to get a correction. So China's housing market

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Speaker 4: has an unusual structure. In China, property developers will sell

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Speaker 4: houses to people off the plan, so that's pretty normal

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Speaker 4: here in Australia as well. But the difference is that

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Speaker 4: they can then start charging people mortgage payments before the

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Speaker 4: house's finished construction. So in China you have a whole

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Speaker 4: lot of people who own houses that don't exist yet

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Speaker 4: and they're paying mortgages on them. What's happened is a

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Speaker 4: lot of Chinese housing companies. I guess if you think

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Speaker 4: about that, you have an incentive to sign people up

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Speaker 4: to these mortgages, but you don't really have much of

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Speaker 4: an incentive to finish the houses if they're already paying

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Speaker 4: the mortgages. So we've got this situation in China I

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Speaker 4: know where a lot of these property developers have just

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Speaker 4: gotten in way too deep. They've over committed massively to

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Speaker 4: the number of houses relative to what they're able to build.

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Speaker 4: We've got a lot of housing developers going under because

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Speaker 4: they've just found themselves in too much debt. They can't

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Speaker 4: handle what they've signed up for. It's so bad in

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Speaker 4: the case of one of China's biggest housing companies, Evergrand,

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Speaker 4: that Evergrand's now facing criminal proceedings as a result of

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Speaker 4: the way that it was structuring its books.

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Speaker 3: That's a really interesting example of something right at the

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Speaker 3: top of the Chinese economy coming literally crumbling them absolutely.

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Speaker 4: Now that's problem number one. Problem number two is China's

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Speaker 4: system of local governments. Now, local governments are not like

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Speaker 4: the local governments that we know. Local governments in China.

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Speaker 4: I kind of think of them as like a fusion

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Speaker 4: between our state governments and like a company, they borrow

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Speaker 4: a lot of money, they get involved in financing housing

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Speaker 4: and construction. They are these quite powerful local entities of

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Speaker 4: their own. They're a very significant part of China's system

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Speaker 4: of government and also of China's economy. And local governments

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Speaker 4: have also been getting in big on the housing and

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Speaker 4: construction boom. There's a lot of talk in China about

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Speaker 4: local councils getting involved in building bridges to nowhere. There

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Speaker 4: are been thousands and thousands of kilometers of railways built

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Speaker 4: all across the country, not always necessarily in places where

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Speaker 4: people actually want to travel. So there's been this frenzy

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Speaker 4: of construction. And again, in the case of local governments,

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Speaker 4: you have governments that have borrowed a lot of money

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Speaker 4: and now find themselves in a bit of a difficult spot.

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Speaker 4: So you have those two things, you've got a bit

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Speaker 4: of a local government issue, and you've got a business

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Speaker 4: issue in the housing market. The third element, and I

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Speaker 4: guess the third part of any economy is consumers, ordinary

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Speaker 4: people and what they're spending. You haven't really had Chinese

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Speaker 4: consumers coming through and spending very much. So, for example,

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Speaker 4: China's had these COVID lockdowns for two or three years.

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Speaker 4: We expected, some people expected when those lockdowns ended that

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Speaker 4: Chinese consumers would be eager to get out to the

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Speaker 4: shops and spend, which is what we saw here in Australia.

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Speaker 4: It's what we've seen in other places. But that just

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Speaker 4: didn't really happen in China. There weren't many cove economic supports.

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Speaker 4: People just didn't have that money to spend. So those

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Speaker 4: three things combined to a weakness that has China at

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Speaker 4: risk of a broader recession, a broader economic downturn. Each

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Speaker 4: of these things are problems in their own but the

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Speaker 4: combination of that for China could be a significant downturn.

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Speaker 4: More businesses closing, more widespread job losses. We've already seen

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Speaker 4: the unemployment rate. The youth unemployment rate in China got

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Speaker 4: so high the government stopped publishing the statistics. That's a

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Speaker 4: sign of how bad things are getting there. That's the

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Speaker 4: kind of thing that China is now bracing for more of.

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Speaker 3: Okay, so we've got the housing market issues, we've got

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Speaker 3: the local governments building bridges to nowhere, and consumers not

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Speaker 3: spending as much as they should or could post the pandemic.

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Speaker 3: What type of response are you seeing from the Chinese

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Speaker 3: government in terms of them trying to prevent a recession.

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Speaker 4: Well, this is the really interesting thing I think, Sam,

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Speaker 4: is that the answer is not much so when Australia

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Speaker 4: right gets into an economic crisis like this, a recession,

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Speaker 4: the way that we are just used to thinking of

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Speaker 4: about it now is what does the government do? Stimulus?

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Speaker 4: We saw it during COVID, we saw it during the

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Speaker 4: global financial crisis. It's just something that governments in Western

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Speaker 4: countries generally do. They'll give people money, they'll try and

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Speaker 4: prop up the economy. That's an idea that we're used to.

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Speaker 4: You might think that China, being a communist country, which

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Speaker 4: certainly has a big role for its government, that the

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Speaker 4: same thing would happen there. But what's really interesting about

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Speaker 4: China's system is that that's never been the case. China

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Speaker 4: doesn't have a well established welfare state, so for example,

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Speaker 4: things like unemployment benefits and even healthcare. I mentioned the

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Speaker 4: youth unemployment rate being really high, and President she has

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Speaker 4: been asked about whether he will consider handouts and unemployment benefits,

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Speaker 4: but his view is that young people are lazy, they

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Speaker 4: don't want to work. They should pick themselves up by

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Speaker 4: their bootstraps and help themselves. He's been quite reluctant to

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Speaker 4: I suppose to hand out the kind of money that

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Speaker 4: might help to prop up the economy at a time

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Speaker 4: like this. He'll certainly come under more and more pressure

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Speaker 4: to do that, But at the moment, at least, it

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Speaker 4: doesn't look like the Chinese government is eager to do

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Speaker 4: the sorts of things that we might normally expect in

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Speaker 4: a country like Australia to navigate a crisis, and that

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Speaker 4: could lead to a worse situation, certainly for ordinary people

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Speaker 4: in China.

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Speaker 3: So we're going to have to wait and see what

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Speaker 3: the Chinese government response will be, if any, and keeping

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Speaker 3: track of those three core factors to see if the

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Speaker 3: Chinese economy worsens. But at the end of the day,

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Speaker 3: what does all of this mean for us For Australia.

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Speaker 4: Well, it's not good news. China is our major trading partner,

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Speaker 4: so China is responsible for about a third of our

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Speaker 4: trade with the world, and so to put that in

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Speaker 4: a financial context, that means that there's billions and billions

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Speaker 4: of dollars that Australian businesses make every year from what

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Speaker 4: they sell to China. So if China goes through an

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Speaker 4: economic crisis and China's not in the mood to buy

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Speaker 4: that from us anymore, that's where we get a significant

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Speaker 4: economic consequence here at home. So again, if we go

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Speaker 4: back to the construction boom and China's demand for steel

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Speaker 4: and iron ore that helps to build these cities that

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Speaker 4: construction boom ends, that's bad news for the countries like

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Speaker 4: Australia who have been selling the raw materials that help

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Speaker 4: to make that happen. But it's true across the Australian

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Speaker 4: economy in so many different ways. We've seen in the

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Speaker 4: news recently, conversation about the wine industry, the beef industry,

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Speaker 4: the bali industry, they're all significant export is typically to China.

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Speaker 4: Higher education a major export. Chinese international students are a

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Speaker 4: huge part of the revenue base for Australia's universities, and

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Speaker 4: that in turn Chinese tourism makes a big difference to Australia.

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Speaker 4: Are so many different aspects of Australian economic life which

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Speaker 4: would be affected by a recession in China, and then

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Speaker 4: of course that has a flow on effect. If people

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Speaker 4: lose jobs in those sectors, there's less spending it in

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Speaker 4: the Australian economy. That's how these things can have a

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Speaker 4: ripple effect, not just in Australia but around the world.

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Speaker 4: So we're certainly vulnerable to something happening in China. Treasure

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Speaker 4: Jim Chalmers has identify as his number one concern in

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Speaker 4: the global economy at the moment, despite wars, despite inflation,

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Speaker 4: all the other things that we're worried about, he's identified

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Speaker 4: it as number one, which I think goes to show

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Speaker 4: just how significant it is.

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Speaker 3: And now, for the very last time, Tom, thank you

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Speaker 3: for joining us on the podcast.

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Speaker 4: Thank you Sam. It's been a pleasure, not just today,

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Speaker 4: but a pleasure for nearly two years.

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Speaker 3: It's been an incredible two years with Tom Zara and

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Speaker 3: it has we're extremely sad that you're leaving, Tom, but

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Speaker 3: we're also extremely excited to see what you do next.

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Speaker 3: What are you doing next?

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Speaker 4: Well, thanks, samm, it has it's been an absolutely wonderful time.

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Speaker 4: I'm off for a new adventure. So I'm moving to Canberra,

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Speaker 4: a place that I've often complained about, but which i'll

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Speaker 4: now be calling home.

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Speaker 2: I was going to say, I'm glad that got mentioned.

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Speaker 3: Tom's right.

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Speaker 4: So I'll be taking up a job with the ABC

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Speaker 4: later this year, covering federal politics, focusing there on young

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Speaker 4: audiences as we have here, and doing many of the

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Speaker 4: similar things that I do here over there. But I

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Speaker 4: won't get the chance to be on the podcast as

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Speaker 4: often as I have with you guys over the last

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Speaker 4: two years. No, it's been. It's been a really am

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Speaker 4: I allowed to give a little speech now? Is that

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Speaker 4: part of it? We're making this a long episode on you.

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Speaker 2: No, there's just going to be some outro music you can.

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Speaker 4: Playing off like the Oscars. No, it's been, it's been amazing.

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Speaker 4: I think that you know the reason that I came

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Speaker 4: to TDA, And as some people may have heard me

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Speaker 4: say on this podcast, I wasn't a journalist before I

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Speaker 4: came to TDA. I was a person who worked in

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Speaker 4: policy world. I always used to be frustrated from inside

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Speaker 4: the system that so often conversations about politics and the

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Speaker 4: news had in a way that excluded people and made

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Speaker 4: them feel that the conversation wasn't about them. And it

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Speaker 4: was that that I saw in TDA that made me

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Speaker 4: so eager to make what was a pretty significant disruption

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Speaker 4: to my steady life as a policy person and to

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Speaker 4: become a journalist instead. And I'm you know, thanks to

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Speaker 4: you guys for making all that happen, but thanks to

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Speaker 4: those of you listening at home who have spent the

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Speaker 4: last two years hearing my voice in your ear. If

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Speaker 4: you ever kind of overhear me talking at a bar

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Speaker 4: or something and you think, oh, that's the voice of

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Speaker 4: the guy from the podcast, please do come and say hello,

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Speaker 4: and don't be a stranger. But it's been a lot

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Speaker 4: of fun, sort of I feel almost like our friendship

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Speaker 4: or a relationship of some sort with the people who

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Speaker 4: are on the other end of this podcast too, I

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Speaker 4: never get to see. So thank you all for listening.

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Speaker 4: I hope that you'll keep supporting independent media, keep demanding

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Speaker 4: better of the media. In Australia in general, because things

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Speaker 4: like this don't just happen, and they don't happen without

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Speaker 4: your support. I think it's always said at the end

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Speaker 4: of TDA podcast episodes that as independent media, it really

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Speaker 4: helps us when you leave a rating or you give

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Speaker 4: us your feedback. But genuinely it really does, so I'll

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Speaker 4: keep tuning in and please do the same.

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Speaker 2: What a beautiful note to end on Tom. We wish

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Speaker 2: you well, We are sad for ourselves, but so goddamn

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Speaker 2: proud of you.

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Speaker 4: So best of luck, Thank you, Zara, thank you Sam.

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Speaker 3: Zara and I are actually hitting the road next week

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Speaker 3: on exciting TDA business. We will be leaving the pod

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Speaker 3: in the safe hands of tda's amazing team that'll be

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Speaker 3: back with you on Monday morning. Until then, have an

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Speaker 3: excellent weekend.