Patersons Securities coal analyst Andrew Harrington told International Longwall News that fixed asset investment in China – which includes infrastructure such as factories, roads, bridges and power stations – has already grown about 25-30% per annum over the last 25 years according to some figures.
“It’s hard to say what these kind of impacts are,” he said in reference to the latest economic stimulus package.
“You have to take a lot of Chinese statistics with a grain of salt. I’ve never been a great believer in the fixed asset investment growth story in China. Obviously it is happening, but the rate, the reported rate, has just been phenomenal – it’s hard to swallow.
“There is no doubt they have been in a building boom. I haven’t been there myself but every first-person eyewitness account I hear from colleagues or friends that have been there [says] the place is a construction site everywhere they look.
“So there’s no doubt they have been building like crazy but you have to take the growth side – when they were putting 9-10 per cent [economic growth per year] they were growing much faster.”
Harrington noted the railway infrastructure development of the new economic stimulus package would be a significant consumer of new steel.
“It will undoubtedly have a positive impact but how positive and how soon is the question mark,” he said.
Meanwhile, China expert Mark Dougan of research and consulting firm Wood Mackenzie – which owns coalportal.com – was also mixed in his views of the stimulus package.
“The real value or impact of a fiscal stimulus package like this in an economy that remains over 50 per cent state-owned is debatable,” he told ILN.
“The move should, however, help shore up commodity prices and demand to some extent – or at least reduce the extent of further falls.”
Dougan said his company’s Energy Market Service was predicting Chinese GDP growth to be 8% next year, and growing marginally to 8.4% in 2010.
“Our ‘Coal Market Service: China’ forecasts continued growth in coal demand, both metallurgical and thermal, over the short term – that will translate into continued opportunity for Australian coal exports into China,” he said.
