LONDON, Aug 7, 2018 /PRNewswire/ --
China has come a long way from the zì lì gēng shēng – "regeneration through one's own efforts" – of Maoist economic policy. The nation that once so steadfastly insisted upon economic self-sufficiency has since opened its markets, and in the 17 years since it joined the World Trade Organisation it has grown considerably from the benefits of global trade.
But in an ironic twist, this has left the country vulnerable, as its commanding presence within the global manufacturing production chain –– as well as the demands of its burgeoning middle class –– has come with a heavy footprint in commodity markets. China needs raw materials, the demand for which must necessarily be met through imports. With a general trade war comes the threat of supply constrictions and rising prices.
For metals markets, global trade has given Chinese businesses access to higher-quality raw material, as is the case with iron ore, where imports make up 87% of the country's consumption. As illustrated in the chart below, despite having proven reserves of over 7 billion tonnes of contained iron, poor quality ore grades mean that domestic supply cannot substitute for cheaper and better-quality material imported from Australia and elsewhere. Disincentivising domestic production also allows the Chinese government to address the nation's pollution epidemic: by taking steps such as reducing air pollutants from steel plants using lower quality raw materials, revoking mining licences for polluting and unprofitable iron ore mines or forbidding bauxite miners from using conventional mining processes such as the use of pneumatic drilling and dynamite, China was reducing smog levels at the expense of domestic supply; with demand nonetheless remaining strong, the supply gap would be increasingly bridged by imports in these sectors. That, at least, was the plan.
Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2018/china-s-commodity-vulnerability/
Read more about CRU: http://bit.ly/About_CRU
About CRU
CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.
Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.
CRU employs over 260 experts and has more than 10 offices around the world, in Europe, the Americas, China, Asia and Australia – our office in Beijing opened in 2004.
When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.
CRU – big enough to deliver a high-quality service, small enough to care about all of our customers.
SOURCE CRU
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article