Since the reopening of the Chinese market in early 2023, increasing traders have been interested in Chinese Products. Based on the LME Asia Metals Seminar 2023, it is estimated that long-term fixed asset investment accounted for up to 40% of China’s economy, which is 2 times the global average.
At the same time, larger demands for commodities globally are led by tech advancement, new energy, innovation, and product developments. This includes the range of products offered by the Chinese exchanges Dalian Commodity Exchange (DCE), Shanghai International Energy Exchange (INE), and Zhengzhou Commodity Exchange (ZCE).
To update traders about China’s position and upcoming plans, this article will cover exclusive content from the LME Asia Metals Seminar by Prof Ba Shu song, Managing Director of the Chief China Economist HKEX. Market research news from Orient Futures Shanghai will also be provided in the following excerpt.
China Economy
Due to urbanization, the number of properties that each family in China owns has increased from 0.07 to 0.08 up to 1.1 to 1.2. Accompanying the increase in properties is the increased use of automobiles, transport, and related trades.
The effects of urbanization over the past few years have been far-reaching. Beijing currently has 2 super airports and there is likely to be an increase in various industries including properties, manufacturing, and government infrastructure. In total, the demand faced by these industries has reached 56%, while cement and glass demand has reached 56% and 35% respectively.
Subsequently, there is no longer a shortage on real estate, and the real estate industry is experiencing moderate growth while construction has sped up. The local Chinese government has also been actively assisting in the completion of renovations.
Aging Population
With Covid 19 and the recent reopening of borders, China is in a period of significant change. Firstly, the labor force has slowed down and it is reported by BBC and several sources that it is the first time in 60 years that China’s population has fallen and the national birth rate hits a record low of 6.77 births per 1,000 people. Secondly, generally, China’s GDP has also increased in the first quarter of 2023, to RMB 28,499.7 billion (US$4,145.5) billion, up 4.5 percent year-on-year (YOY) at constant price. Overall, China’s GDP growth is expected to pick up to 5.4%.
In the face of increased spending from the elderly population, other related sectors in the healthcare sectors are also gradually increasing however, for certain categories of food products, living estates, vehicles, and some the products, demand is expected to slow.
Demand for Commodities and RMB
In association with urbanization and real estate, complementary products including steel, or concrete are also faced with increased demand. This is due to its usage in other projects, such as road, buildings, and infrastructure.
China plans to diversify trade settlements, promote RMB, and launch products denominated in USD in the coming years. Overall, the goal is to diversify trade settlements so that traders can have more avenues for trade.
Carbon and Environment
On September 22, 2020, President Xi Jin Ping announced at the 75th United Nations General Assembly that China would enhance its national contributions and implement stronger policies and measures. The measure was named the “Two Carbon” objective or 双碳”目标, and the state council had issues a series of plans to achieve these goals.
The plan emphasizes that achieving peak carbon emissions and carbon neutrality is a major strategic decision, mostly to reduce greenhouse gas emissions, and promote climate goals such as energy efficiency usage in fossil fuels to energy conversion. Addressing climate change, as represented by the Paris Agreement, is expected to embody the global direction of green and low-carbon transformation, though it constitutes the minimum action required to protect our planet.
Specifically, energy consumption per unit of GDP will decrease by 13.5% compared to 2020, and carbon dioxide emissions per unit of GDP will decrease by 18%. By 2030, energy consumption per unit of GDP will decrease by over 65% compared to 2005. The proportion of non-fossil energy consumption will reach about 25% with a total installed capacity of wind and solar power reaching over 1.2 billion kilowatts. Lastly, by 2050, energy efficiency in key industries is expected to have a solid foundation for achieving peak carbon emissions.
From the LME seminar, prof Ba Shu Song mentions that the energy and resources industry achieving low carbon goals no longer only be achieved by incentivizing carbon emissions, instead it can be further achieved through battery metals and more efficient sources of energy. For LME, research for a collaboration between QME and LME is a possible venture, this is expected to provide more opportunities for the global markets as well as the carbon markets.
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