Last Updated : 23 November 2012 at 14:55 IST
Is the China commodities boom story for real?
Author :George Iype
Is the Chinese growth story crumbling these days? May be, it is time celebrated Chinese advocates like Warren Buffet and Jim Rogers made some profound statements on Chinese economy in general and the global commodities markets in particular.
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By George Iype
Put your money in China: this is what global analysts and investors ranging from Warren Buffet to Jim Rogers have been telling people in the last few years. Hedge funds, commodities and stock market investors, speculators and even astrologers have been urging people to put their money in China. Most of them have been betting big on China’s growth story saying that the dragon country being the largest consumer of several commodities in the world is the right choice for investing your hard-earned money.
Largely, the China growth story has been very rewarding for global private equity players, investors, bankers and budding entrepreneurs. Also, globally, exporters and importers of commodities shifted their focus to China, as the country emerged as the largest warehousing and consuming ground for most of the widely-used commodities.
It is not just with commodities alone in which investors were thrilled to be in China. Even in the information technology field and start-up web ventures, some of the big Chinese companies like b2b major Alibaba and web services and Chinese language search engine giant Baidu have given a run for the money to the US-grown tech biggies like Amazon and Google. So far, it has been so good for those who stayed invested in China.
But is the Chinese growth story crumbling these days?
In the last few months, China has been lowering its growth forecast. The World Bank in its biannual East Asia and Pacific economic report lowered the growth forecast for China warning that the slipping Chinese economic growth will pull down over-all growth in emerging East Asia. The Chinese growth worries coupled with the teething debt crisis in Europe are expected dampen the global appetite for commodities.
Slashing its economic forecast for China to 8.2%, the World Bank said that the East Asian region would grow only by 7.6% in 2012, down from the earlier forecast of 7.8%.
The slowing of Chinese economy is having a telling effect on commodities these days. Take, for instance, the state of affairs for commodities in Canada. Canada is one the largest producers of hot commodities like gold, copper, nickel, silver and several agricultural commodities. And China is one of the biggest buyers of Canadian commodities. Reports now say that the Chinese industry is slowly but steadily reducing the import of Canadian commodities. Commodities markets across the globe, and especially in Canada, have been tumbling on the declining Chinese growth numbers in the last few months.
China still continues to be one of largest consumers of several hot commodities like copper, nickel, silver and gold. Most agricultural commodities around the world have been on a high thanks to the ballooning consumption of rice, wheat, coffee, tea, soybean, cotton etc by the Chinese. But now that the Chinese economy is showing symptoms of faltering on the lines of the Eurozone economy—though on a lower scale, the fear that is lurking in the minds of investors is if the commodities markets will crash-land by the end of this year.
May be, it is time celebrated Chinese advocates like Warren Buffet and Jim Rogers made some profound statements on Chinese economy in general and the global commodities markets in particular.
George Iype is the Managing Director and Chief Executive Officer of Commodity Online Group. He can be contacted at firstname.lastname@example.org
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