Feeding the Dragon: China Will Pay for Commodities
YOU MAY BE OF THE CAMP that believes surging raw-materials prices might actually be the culprit that triggers a slowdown in China. If so, Richard Elman, founder and CEO of one of Asia's biggest trading companies, Noble Group, begs to disagree.
"They must maintain growth. They need to improve living standards. They can tighten credit" to reduce demand, "but lots of the companies are very healthy and also private." Such companies would simply bid higher for materials. So if an electricity shortage ensued, for example, China would simply buy more steel to build more power plants.
And so far this year, "we haven't seen any let up. Prices will rise simply because there's been no investment in commodities," Elman predicts.
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Once again people are saying what they THINK China will do as opposed to listening to what China is saying they WILL do. This is opposite of China official statements. I put more faith in what China says it will do on commodities and the Renmimbi as opposed to what everyone thinks they SHOULD do. Renmimbi "floaters" have been wrong for 8 months now and are still silly enough to be insisting that China will do what China has said they will no do.
Now at the peak of a huge commodity boom, with china's growth unsustainably high, people are predicting that China will keep the boom booming bigger in the face of official statements.
This is just like all the people not believing Greenspan focusing on jobs and keeping rates low for "a considerable period" or now "patient". Why is it that people are willing to believe what some silly analyst says when the people making the decisions are telling you flat out what they are going to do?
Finally, we have people becoming wildly bullish on commodities just as China is wanting to slow things down. Where was everyone last year on copper and steel? After this runup in the face of slowing growth in China, slowing growth in Europe, and bad consumer sentiment in the US, we see stuff like this.
It is absurd.
Mish |
