Transcript The Southern Engines of Growth and Hard Commodity Prices: Does

The Southern Engines of Growth and Hard
Commodity Prices:
Does China Lead to Disruptive Development?
3rd China Postgraduate Network Annual Conference
8-9th April 2010: Oxford University
Masuma Farooki ([email protected])
The Main Issues
1. Commodities in Development
2. Commodity Prices
3. China’s Demand for Commodities
4. Optimism for Commodity Exporting Developing Countries?
Commodities In Development
The Resource Curse
– Deteriorating Terms of Trade
– Price Volatility
– Enclave Economies
– Political Instability and Conflict
What’s in a Price Movement?
Commodity Boom:
A peak that is much higher than previous peaks.
The Cycle:
Short Term; a peak/trough to peak/trough measurement.
The Super Cycle:
Medium Term; a prolonged trend rise over a decade.
Commodity Price Movements 1960-2008
350
Price Boom
300
250
Price Cycle
200
150
100
50
Super Cycle
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008
Source: UNCTAD All Commodity Price Index
2003-2010 Commodity Prices
500
450
400
350
300
250
200
150
100
50
0
1960
1965
1970
All Commodities
1975
1980
1985
1990
Agricultural Raw Materials
Source: UNCTAD Monthly Commodity Price Statistics
1995
2000
2005
Minerals and Metals
2010
Oil
What does the 2003-08 Price
Movement represent?
• Is it just a Price Boom?
• Is it a temporary interruption of a Super Cycle, due to
the financial crisis?
To be a Super Cycle you need:
• Price rise over a decade or more
• Be driven by demand in an expanding economy
The 2003-08 Super Cycle
350
300
250
200
150
100
50
0
2002
2003
2004
Source: UNCTAD All Commodity Price Index
2005
2006
2007
2008
A Southern Driver of Growth
• China: The Large Country Impact
– Volume of Demand
– International Sourcing
• China: The Developing Country Impact
– Resource Intensive Growth
– Years to maturity
China’s Share of Global Consumption of Base
Metals
1990
2000
2007
1
Base Metals ( % Share of World Demand)
Aluminium
5
13
33
Lead
Iron Ore
Copper
7
4
7
Source: 1 Macquarie Commodities Research (2008)
10
16
12
31
48
26
Optimism for Commodity
Exporting Developing Countries?
Chinese GDP/Capita and Mineral Consumption
China’s Importance for Commodity Exporting Developing
Countries (1990-2006)
% Share of Region in Chinese Imports of Base Metals
Region
1990
1995
2000
2006
Low and Middle Income
30%
46%
46%
56%
Latin America
9%
17%
18%
27%
Asia
6%
6%
8%
13%
SSA
6%
9%
6%
5%
% Share of China in Regions Exports of Base Metals
1990
1995
2000
2006
Low and Middle Income
2%
7%
11%
27%
Latin America
1%
5%
9%
24%
Asia
6%
18%
35%
80%
SSA
2%
10%
12%
26%
Source: Author’s calculations from COMTRADE via WITS accessed in July 2009.
Projected Global Growth
Global GDP Growth (%)
15
10
5
0
-5
-10
2006
World
2007
2008
2009
Advanced Economies
Source: IMF World Economic Outlook (January 2010)
2010
2011
Emerging Economies
• China’s demand is expected to remain strong in the
medium term.
• China will rely on commodity imports for its consumption.
• Commodity Exporting Developing Countries can benefit
from this opportunity.
• Domestic policy will inform how these benefits are
translated into development.