Lower Commodity Prices will Help Chin...
Home  »  Community News  »  Lower Commodity Pric...
Jan
27
Ida Hansen
Lower Commodity Prices will Help China
Blog
0
, , , ,

Even though the stock market fell due to growth concerns from China, the prices for commodities such as oil (NYSE: USO), coal (NYSE:), and natural gas (NYSE: UNG) should improve for buyers for that country.  As China is the largest consumer in the world of many commodities, that will naturally help the economy.  In addition, the strengthening of the Yuan, its currency, will make imports even cheaper.

That results from a stronger currency being worth more in international trade.

From that, it is cheaper to buyer goods priced in other currency units.  With China importing so much, it will result in those goods and services being much cheaper. It will hurt Chinese exports as the higher priced Yuan will raise the prices of what is sold abroad.  But with the country focused more on domestic demand, that will not have the impact it once did.

United States Oil, the main exchange traded fund for oil, is down nearly 8 percent for the last six months.   For 2014, Market Vectors Coal, the exchange traded fund for coal, has already fallen close to nine percent.  The exchange traded fund for natural gas, United States Natural Gas, is up due to the record cold weather in the United States.  But it should decline when the temperature increases America.

China already a record trade surplus.

Each month, it books about another $30 billion in profit.  This should improve with the falling prices of commodities and the rising price of the Yuan.  With its fuel sources so much cheaper, Chinese companies should do even better.  China already has more purchasing power than any country in the world. The combination of a stronger economy and weaker commodity prices should improve the increase the economic puissance of the People’s Republic of China.  Investors should remain bullish on China due to commodity prices declining with the Yuan rising.



Share on StockTwits

Leave a reply

Your email address will not be published. Required fields are marked *