China focuses on domestic growth

In September, the blog wondered whether “China’s interest in remaining the manufacturing capital of the world may be starting to wane”. Yesterday, Lou Jiwei, the chairman of China’s sovereign wealth fund (China Investment Corporation) confirmed the new focus on domestic growth. He suggested that “if China can do a good job domestically, that is the best thing it can do for the world”.

Lou’s statement echoed last week’s comments from President Hu Jintao that “difficulties in the global economy threaten to undermine growth in China”. Lou also added that major losses in their western financial investments (for example, Blackstone down 82% since they bought at $29.60/share), meant they “do not have the courage to invest in financial institutions because we do not know what problems they may have”.

Asian chemical demand is tied to GDP/capita growth in the West, not to domestic needs. So China’s new focus means much slower growth in local chemical demand. As the blog warned a year ago ,”decoupling (of the Asia economy from the West) is a good story, but its not going to work going forward”.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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