Chinese Trade – Turning Value Conscious or commodity trade?

There is a weakness in Chinese economy which has compounded due to the weak-yen in Japan. Chinese policymakers will not let the global weak demand have an impact on the growth of their economy. They have already begun talking about commodity trade. Having responded with rate cuts, they are playing well with the theme of the market. It is expected that China will revive the economy through an aggressive action in commodities. Commodities will be one of the greatest trades in the decade. In 2009, China began stock piling the commodities which were trading at dirt cheap prices due to the global financial crises. China is following the same pattern again, only this time, it could mean global trade leads.

As an investor, you could be wondering whether it is a good or bad time to invest incommodities. You need to first understand the difference between stocks and commodity markets. Stocks are related to the economy and are highly volatile. If a few stocks show a negative return, your entire portfolio would end up with negative returns. Commodities, on the other hand,are unrelated. One commodity has nothing to do with another and if the market for one falls, the others are unaffected. A rise in the commodity trade in China could mean an increase in the global trade. The Chinese are piling up on commodities and waiting for the economy to revive.

Prices of all the commodities have rapidly grown over the last three years and every commodity has benefitted from the fundamental shift. The global supply is in pace and has kept up with the demand. The future of the ever-expandinge-commerceindustry is cross-bordere-commerce. China has a global share ofcopper and aluminum at 50% and 47% respectively. This makes up for about 15% of the global economy.A high concentration towards commodities also brings an import exportbusiness opportunity for countries exporting to China.

Different trade sites show that the demand for commodities in China has been rising over time. Many commodities are high in demand which has left investors cautious about the commodity cycle. There is a strong growth in China which led several commodities to record their highest over the last decade. This may not be another super cycle; it will be of a shorter duration and may have different dynamics. There is an irresistible force of the global push which has opened doors for export trade.Companies are underestimating the long-termimplication of the commodity supply chain but how it fares; only time will tell. For now, China is driving the commodity market and if the demand goes down, it will have an impact on various economies across the globe.

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