For many decades, China was the world’s default factory. It sucked up commodities from all four corners of the globe to power its factories. These factories then go on to crank out products that developed economies far and wide loved to consume. That was the old arrangement, and that’s why China’s annual GDP growth rate was nothing short of phenomenal.
Now, the official growth rate of China has come down to earth. Of course, it hasn’t crashed or led to a shrinkage of the Chinese economy. Instead, China is now growing at a normal rate. It’s still quite impressive and definitely enviable but considering the fact that China is still a relatively less developed country compared to the United States or the United Kingdom, it’s understandable why China’s growth rate is impressive compared to these more mature economies. Expect that to continue for quite sometime.
However, don’t confuse that relatively high growth rate with the previous growth pattern. This has a tremendous implication for countries like Canada and Australia that are very export commodities dependent. Moreover, certain parts of Africa are dependent on commodity exports to China. Now, that China’s growth rate is changing and is beginning to transition to a more consumer-driven society, expect long-term trends in the commodities market.
It used to be that commodities like copper were a sure shot—not anymore. You can still make money, but you better bet long and you shouldn’t bet on any tremendous rates of appreciation. There’s still money on the table but not as predictable and as not as big as before. China is maturing, and it has reached a certain level of peace with a more sustainable and realistic growth rate.
Again, we’re talking about official government figures. Since the Chinese government isn’t exactly the paragon of accountability and transparency, we just have to take their word as far as their economic numbers are concerned.