Commodities
Last
year was not the best for mining as a dip in Chinese growth sent prices falling
across the commodities spectrum. Some of the main losers were copper and oil
both of which slid by over 25 percent.
Consumers,
however, are counting their savings as petrol prices and other basic products
dropped in price.
Most
observers are blaming China, and its stagnating development, for the declines
and iron ore suffered the worst drop having plummeted over 85 percent from its
crest in 2010.
The China factor
The
meteoric rise of China over the last 20 years in undeniable. It became
manufacturing headquarters for the entire globe and a major factor in world
economic growth. But last year the behemoth stopped eating up all the commodities
the Earth was producing.
Now
India, China’s biggest regional competitor, has faster growth. Chinese data
puts growth at below 8 percent.
Some
experts think the figures are inaccurate and the situation could be a lot worse
in reality.
Tony
Harris, Senior Vice President of Equity Trading at Softbank CIBC International
says the issue could be a drop in confidence in the leadership of the nation. “It’s
not so much their style of leadership that is the problem here,” Harris said in
an email yesterday, “The problem is more that they really have nothing to work
with to turn the situation around. Capital outflow is just too high. Half a
trillion in outflow is no joke.”
Harris
added that when you pare this with failed interest
rate adjustments and a massive annual rise in government spending, China have
been left in a bad place.
“It’s
as if there has been a total reversal in the economic policies,” he said.
Other
experts are more optimistic saying the government still has some wiggle room.
“There is still a possibility the authorities can avoid a financial crisis,”
said Jonathan Fenby of Trusted Sources research group, “This is not to say
there will not be massive slowing of growth for at least a couple of
years….there definitely will.”
