China: From smokestack to sweet tooth

(From Nikkei Asian Review)

Commodity prices continue to flag as China’s explosive purchases of resources, prompted by its rapid economic growth, run out of steam.

The Chinese economy is moving away from its reliance on heavy industries, which consume massive amounts of iron ore and coal, toward consumption and services led by the growing numbers of middle-income consumers. As a result, demand for commodities is starting to show signs of change.

Investment strategies

According to one Japanese market official, many on Wall Street are recommending short positions on crude oil and long positions on coffee beans. Investment strategies for the two commodities form a marked contrast as a result of structural changes in the Chinese economy, the official quoted a New York trader as saying.

Short positions on crude oil are profitable as prices are at a seven-year low, while long positions on coffee beans have better a chance of earning profit despite weak prices.

starbuck-chinaTrading prices of commodities related to the Chinese market tend to move quickly, with coffee being a typical example.

The number of Western-style cafes on the main streets of Chengdu in central China is increasing on a seemingly daily basis, just as it is in major cities across the country, where both foreign and local coffee shops are fiercely competing in the race to open new outlets. Read more

Categories: Asia Unhedged, China

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