china cut back, page-25

Rich

Presume you saw the articles in this weekends Fin: pages 22 and 46?

The key comments in there for me were:

"China's economy is facing what looks to be its biggest test since 1978, according to Paul Cavey of Macquarie Research Economics in Beijing. "Wityh the two major economic engines of growth - exports and real estate construction - both stalling, the economy risks its first simultaneous downturn of external and domestic demand since 1996."..

China cannot save the rest of the world from recession, nor can it save the global resource markets from falling further. It is only part of the global commodities demand picture. The non China world is more important than China, consuming 60 to 70 percent of the world's commodities.

As the non-China world slumps so too are the resources prices falling.

Worse, the slowdown in China exarcerbates this slump.

China's construction sector accounts for 55 percent of China's total demand for steel. China is the largest producer and consumer of steel in the world.

Steel demand and steel prices are now falling, as are iron ore prices and demand

Chinese steel mills have said they have agreed to cut production in an atempt to stabilise falling prices. Shandong Iron and Steel, Hebei Iron and Steel, Shougang and Anyang Iron and Steel have agreed to trim out put by 20 percent from teh start of October.

In 2007 the four companies had a combined output of about 77 million tonnes, or 16 percent of Chinese production, not far below US steel production.

Macquarie Bank analysts note, however that "due to the highly fragmented nature of teh Chinese steel industry, we remain sceptical of the sustainability of collective production cuts"...

China is not overleveraged. It has the surpluses to spend on rejevenating its slowing economy. And Beijing is intend on restimulating its slowing economy. It knows economic growth means political stability...."