News

January 12, 2009

Will China Get Stronger Or Weaker In The Short Term? There’s A Lot Hanging On It...

By Rob Davies

Up till now the two great saviours of the commodity market - not that you would have noticed much - have been Chinese demand, and supply constraints. A graph shown last week at a presentation by Albert Edwards of Société Générale gives strong grounds for suggesting that the Chinese support is about to evaporate. Chinese economic data has long been regarded as more about PR than hard facts. Historic growth rates of 10 per cent may have been on the optimistic side, but they were at least backed up by data on consumption of raw materials and electricity generation.

The Chinese premier is reported to have said recently that China is likely to be the first country to recover from the global financial crisis. He also promised further economic stimulus packages across seven key sectors of the Chinese economy, with the auto industry likely to be among the first beneficiaries. But business confidence in China is down, according to the latest survey, and the graph Mr. Edwards has shows Chinese electricity generation falling off a cliff in recent weeks. His view...