Mr Frank Holmes Author of US Global Investors said that copper prices should benefit as Chinese demand is likely to grow during the year of the dragon on the back of restocking and as supply battles to catch up.
Mr Holmes said that at the Cambridge House's Vancouver Resource Investment Conference this week, I am part of a special debate on whether China will boom or bust with bestselling author Mr Gordon G Chang. The title of Chang's book, The Coming Collapse of China, states his position quite clearly and I look forward to the intellectual challenge of convincing him otherwise.
He said that I've found many people are particularly energized about predicting a hard landing for China's economy, but I believe the country is no sinking ship. China isn't fast-approaching an iceberg in the dark of the night like the Titanic. Beijing has long been anticipating the ice chunks and subtly adjusting the rudder around inflation without steering the economic ship too far off course.
China's government angled its vessel away from inflation by increasing the required reserve ratio every month for the first 6 months of 2011 and raising interest rates 3 times. Once inflation was sufficiently under control, the country began to steer in a direction of growth again.
Recent results show how positive this easing has been. In its latest research this week, BCA Research reported that despite the policy tightening of 2011, the most recent economic data out of China has all but confirmed that the economy remained incredibly resilient.
One significant data point is the sharp increase in money supply. After the country hit a low level of monthly money supply growth, the 3 month change in M-2 money supply climbed to record levels during the final month of the year, says Greg Weldon of Weldon Financial.
He said that money supply pegged at +6.419 trillion, easily exceeding the previous record 3 month increase, seen at the peak of the global crisis in March of 2009.
Easing in China is expected to continue through 2012, with ISI Group anticipating a potential RRR cut after Chinese New Year celebrations in February, then possibly again in April, June and August. Also, loans have become more readily available in recent weeks. This should all be bullish for commodities, such as copper, oil and gold and also trickle down to boost share prices of natural resources equities.
(Sourced from www.mineweb.com)
