China Will Pay A Price If It Remains Stubborn On The Issue Of Resources

According to the America media, if China sticks to its present policies on the issue

of mineral resources, it will pay a high price for its stubbornness in the future.

For more than a decade, the Chinese government has been worried about the possibility that global market can not meet the domestic needs for natural resources. Today, however, they are facing a different but the same serious problem: traders are taking advantage of the abandoned warehouse, parking and granaries to store excessive iron ore, copper, coal and other metals and minerals. They buy these resources for the need of sustaining economic expansion. However, the sustaining economic expansion does not appear.

At the same time, China will continue to uncontrollably to pay high prices to buy overseas minerals. Regardless of how these investments can ensure the supply, up to now they have no effect on world prices, because these investments often have been put in existing minerals, rather than drilling programs that can increase production. At present the role that storing these resources can play has not been indicated in the market, while a too large sum of money has been spent. To some extents, the biggest effect that the sum of money has is to endow the purchasers kind of assurance. At least, these enterprises need to be assured of the sufficient supply for them to maintain a sustainable production. Today, these items are not so profitable because of the decline of these minerals on the international market. These investments mean that China will lose money.

In addition, the same story happens to copper. This year, the import of copper has increased by about 70 percent, while economic growth has slowed down. Investment banking analysts recently shot the photographs showing the final destination of these imports of copper. Copper is stored in a customs bonded warehouse, almost touched the roof of the warehouse to block the warehouse entrance, and even also has occupied the parking lot.

The recent phenomenon that a lot of resources have not been used is usually interpreted as because those Chinese buyers have failed to correctly predict the demand for commodities. This is true. However, the reasons behind this phenomenon points to a more serious problem: this is not the problem committed with an error of judgment that an enterprise will make if it runs its business under the market economy environment; this results from the Chinese governments ignorance of the strong power that price may exert on market change.

by: annie

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