Implications of Weakening Chinese Commodity Demand
Several commodities may lose a long-standing structural demand driver in China's economic shift.
Through sustained rampant growth, China has forged itself a place as an economic powerhouse in the international community. Typifying this trend, the past 10 years saw annual real GDP growth in China consistently range between roughly 9% and 14%. However, few, if any, economies can sustain such growth forever. Today, we believe China stands at the precipice of a major economic inflection.
A weak global economy has left the traditionally export-driven nation without a reliable outlet for extrinsically driven growth. The most recent additions to GDP have come from fixed-asset investments, but it seems that those avenues, too, have been exhausted. With the passage of the nation's 12th five-year economic plan, the shift toward a consumer-led economy is officially underway. The shift stands to take the wind out of the sails of commodity inputs relied upon throughout the nation's infrastructural binge.
Abraham S.H. Bailin does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.