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China economy
Opinion
Boris Ivanov
Boris Ivanov

The View | Why a China slowdown is bad news for commodities and the global economy

  • China’s rapid growth and spending on infrastructure has powered demand for global commodities for a number of years
  • But, with ongoing Covid-19 lockdowns and a construction slowdown, commodity producers around the world will need to consider new resilience strategies

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A man and a woman ride past an unfinished China Evergrande residential development in Beijing, on July 29. The war in Ukraine, resurgent inflation and a slowdown in China’s construction sector have all contributed to a volatile first half of 2022 for commodity prices. Photo: Bloomberg
Boris Ivanov

China is the biggest commodity consumer in the world by virtue of its population and economic growth. Its economic health has a great bearing on the course of commodity prices – particularly metals and minerals. For a few years, China’s infrastructure spending has been driving growing demand for commodities including steel, copper and aluminium.

However, that is about to change as Chinese growth slows. The implications for regional trading partners and the world remain to be seen.

China’s fast-growing economy was sufficient to push imports higher each year. However, this year, the International Monetary Fund expects the Chinese economy to expand by just 3.3 per cent, which is well below the government’s official target of “around 5.5 per cent”.
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Beijing recognises that change is afoot. At the quarterly economic meeting on July 28, the Politburo said growth should be kept within “a reasonable range”.
The conflict in Ukraine, resurgent inflation and a slowdown in China’s construction sector have all contributed to a volatile first half of 2022 for commodity prices. China continues to struggle with mounting Covid-19 cases and full or partial lockdowns in large cities, including the financial and manufacturing hub of Shanghai. This continues to delay economic recovery.
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In China’s once-booming property market, home sales have fallen year-on-year for 11 consecutive months. Several Chinese developers have stopped constructing the homes that were already sold because of cash flow concerns. In recent weeks, some homebuyers have threatened to stop paying their mortgages until the work resumes. The property market is in a precarious position.
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