China's Massive Stimulus and U.S. Steel Companies
China's stimulus program is stabilizing the world steel market.
China's CNY 4 trillion ($586 billion) stimulus program made its economy the envy of the world. Chinese steel prices bottomed in March and imports of base metals soared in the second quarter. How will Chinese stimulus spending affect the United States steel market? Are U.S. steel companies likely to benefit from Chinese demand? Here we break down China's stimulus spending and highlight how Chinese demand is affecting U.S. producers. The numbers seem to suggest that Chinese stimulus demand is helping to stabilize the world steel market, which in turn benefits U.S. steel producers.
An Analysis of Chinese Stimulus Spending
According to the details provided by the central government, over 60% of the $586 billion stimulus package will go into infrastructure construction, including railways, roads, airports, power grid investments, rural infrastructure, and earthquake zone reconstruction. Another 9% goes into rural infrastructure spending such as paving roads and building bridges. The rest of the stimulus spending will be directed to the provision of welfare and environmental programs.
Min Ye does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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