Identifying the Linkages between Major Mining Commodity Prices and China’s Economic Growth—Implications for Latin America

IMF Working Papers, April 1, 2011

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Major mining commodity prices are inherently volatile and cyclical.
High levels of investment in China have been a key driver in the strong world demand for minerals and metals over the past decade.
The urbanization and industrialization of China have been important factors behind the increase in domestic demand and high investment growth.
China's export sector is also an important source of growth and plays a critical role as a catalyst.
Activity in infrastructure, construction, real estate, and automobile manufacturing all contribute to the strong demand for minerals.
Over the next five years, Chinese demand is expected to remain strong, supported by investment and gradually rising consumption rates.
In the second part of this decade economic growth in China could slow down.
For Latin American countries, export receipts should remain strong over the next five years and beyond, given the continued strong demand from China.

Commodity price dynamics:
- Major mining commodity prices are described as inherently volatile and cyclical.
Drivers of demand in China:
- High levels of investment.
- Urbanization and industrialization increasing domestic demand.
- Export sector acting as a catalyst for growth.
- Sectoral contributors: infrastructure, construction, real estate, automobile manufacturing.
Medium-term outlook:
- Chinese demand is expected to remain strong over the next five years, supported by investment and gradually rising consumption rates.
- Possibility of a slowdown in China’s economic growth in the second part of this decade.
Implications for Latin America:
- Export receipts for Latin American countries should remain strong over the next five years and beyond due to continued strong demand from China.