For investors in commodities, a prolonged Chinese stagnation means lower demand for commodities, especially industrial commodities, and therefore lower prices.
FORBES: Chinese stagflation, and what it means for investors
This ETF gives access to the Chinese materials and commodities sector that would benefit from increased home building and the purchase of consumer appliances and furniture associated with it.
While Chinese demand growth for commodities is not expected to be as robust as it has been historically, demand is expected to pick up throughout 2012.
Some blamed the sharp drop Tuesday on progress made in the U.S. fiscal cliff negotiations, while others said worries about Chinese demand for raw commodities was the culprit.
The Chinese are reportedly investing in commodities in part as a hedge against a falling dollar.
Further, an improving Chinese economy could mean higher commodities generally and also prompt China to become more aggressive in relaxing the peg of its currency against the dollar, which would be supportive for gold, he added.
FORBES: Chinese Data Sends Some Base, Precious Metals To Highest Levels In More Than A Month
Besides the Chinese data, gold and other commodities also are drawing support from a softer U.S. dollar, said Bob Haberkorn, senior commodities broker with R.
FORBES: Chinese Data Sends Some Base, Precious Metals To Highest Levels In More Than A Month
It will drive prices for commodities down, and prices of Chinese-made goods will likely decline as well.
Worried about its dependence on foreign producers, the Chinese government is now offering incentives to find and produce commodities.
But the prospect of Chinese economic officials tightening monetary policy has negative demand implications for raw commodities, including the precious metals.
Chinese and Indian demand for raw materials has driven world prices for commodities (of which South American countries are big producers) to unprecedented levels.
The enormous amounts of liquidity that led to the housing and commodities bubbles of recent years cannot be blamed on thrifty Chinese but on the excess money creation of Greenspan and Bernanke.
But they are still hugely up on the year and copper bulls think that prices will be supported by the booming Chinese and Indian economies, recovery in Germany and Japan and a growing appetite for commodities as a financial instrument.
The commodity story of China being the demand force for oil, minerals like iron ore and agricultural commodities is still in play, but savvy fund managers are turning inward along with the Chinese government.
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