Friday, February 12, 2010

Marc Faber: China and Commodities

Marc Faber on China and Commodities

Normally I'm very close to the majority of conclusions made by Marc Faber, but in the case of his assessment that the Chinese economy may crash, I'm not so sure he has that correct.

One thing I want to see is if China is really going to tighten its domestic lending policies, or if it's using that as leverage as it continues negotiating prices for a number of commodities it needs this year, like iron ore, molybdenum and other raw materials.

Those are related to steel of course, and that goes beyond the slowdown in their infrastructure projects which had been financed by the Chinese government's stimulus package.

With steel being related in a large degree to exports for China, it does have some counter to the cut back in raw materials needed domestically. Copper on the other hand has a good chance to be vulnerable to downwards price pressure.

There is no doubt China is attempting to cool of its economy, and to some degree with a number of commodities it'll be interesting to see if they start dipping into their stockpiles which they built up over the last couple of years to have more control over commodity prices.

Short term it is quite possible China will encourage a downward pressure on some commodity prices, it's a matter of how long and how much which is what none of us can know.

Marc Faber on China and Commodities

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