Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China’s Stimulus Talk And Buying Silver On The Copper Dip

Economics / China Economy Dec 21, 2011 - 06:04 AM GMT

By: Dr_Jeff_Lewis

Economics

All eyes are now on China as a source for consumer strength in the developed world.  Customs data released on December 10 tells a concerning story - China's overseas shipments are growing, but at their slowest pace since 2009. 

In November, China recorded 13.8% growth in overseas shipments from the year-ago period.  However, Chinese trade balances are beginning to turn decidedly toward an imbalance.  The balance numbers recorded a 35% plunge in China's trade surplus, enough to worry investors that European consumption is dropping dramatically in light of a debt crisis. 


Stimulus

Analysts expect the Chinese central bank to loosen reserve ratios and allow easier lending standards to come back into place in the property market.  Alongside monetary stimulus, some expect a massive stimulus project aimed at developing domestic sources of demand.  For much of the last decade, China's economic growth was fueled externally by international buyers.  As the populace ages and becomes wealthier, China's consumer class will have to give it the strength necessary to wade through slowdowns in the general global economy.

There is little debate about whether or not a slowdown will occur, but rather when the slowdown will occur.  The least confident estimates point toward a Chinese trade deficit occurring by the first quarter of 2012 – which is just months away.

Official Inflation

Official inflation readings from Beijing ran at only 4.2% as of last report.  The precipitous decline in inflation is, according to analysts, an effect most directly linked to the cause of credit controls.  The Chinese government vastly increased the amount of capital necessary for purchasing real estate on credit to stifle a building real estate bubble.  Now only a few months out from the enactment of anti-bubble policies are fears of global inflation. 

Investors are even reversing bets on Chinese yuan appreciation, a surefire sign that the market expects more slowing from China, as the long-yuan trade has been historically one of the most consistent in all of the global markets. 

The Two "Cs"

Few investments are more directly linked by investors than the two Cs - China and copper.  China's robust growth creates a growing proportion of total copper demanded and is the source of ever-rising prices.  For this reason, copper has become a very popular source of exposure to China for international investors.

For bullion investors, particularly investors in silver bullion, copper prices are equally important.  Lower copper prices mean far less silver production, as most silver mined today is mined as a result of mining for other, more plentiful metals like copper.  In going forward, weaker copper prices could greatly strain silver production in 2011, even as industrial growth rides a trend that is mostly resilient to economic slowdown.  Silver's best source of demand is photovoltaic cells, which are certain to be subsidized for several more years by western governments, even as prices continue to fall.

The bottom line is this:  China has plenty of capital to enact a stimulus spending spree and will likely do so.  Silver investors should take the chance to buy inexpensive silver on every copper dip, as China's foreign holdings will fund any stimulus of any size.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2011 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in