After a tough year for the Chinese economy, politicians seems to have a clearer panorama for upcoming seasons. While this country remains as the biggest gold buyers in the world, indicators could be changing due to the influence of local industries.
A recent announcement from the Chinese Ministry of Industry and Information Technology said that gold demand growth is expected to decrease to an annual average of 4 percent regarding the four upcoming years.
This still means that China will consume more gold than never before, only with a slowdown in growth. The same announcement shared with the media some estimates regarding consumed tons.
The Ministry expects to consume 1,200 tons in 2020, representing an increase in comparison with 2015, when 986 tons were consumed. The domestic output is also expected to increase, with an estimated included. In 2020, 520 tons are expected to be produced, in comparison with 450 tons during 2015.
Relevant Economy Changes
The same announcement from the Chinese government exhibit estimates not only for gold consumption but for others metals as well. The data includes copper, aluminum, lead, and zinc.
These changes come from a plan for non-ferrous metals’ needs, applying more control on what the country truly demands. This plan is a response to the wild backlashes suffered by the Chinese economy in previous years, linked to poor control on the productive mechanisms and slowing exportations.
Copper annual growth for the 2011-2015 period was at 8.9 percent. The new estimate for the upcoming five-year period is around 3.3 percent. For aluminum, annual growth will go down from 14.4 to 5.2 percent.
For lead, annual growth will go down from 0.8 percent to 0.6 when comparing 2011-2015 period with the upcoming 2016-2020 one. Zinc demand growth will cut down in half, going from 3.5 percent to 1.7.
What Does This Mean for the Markets?
Pessimist investors will see a tragedy here but there is nothing massive happening, actually. Demand is not decreasing, only its growth rate. China will require massive amounts of minerals, more than the country is requiring right now.
In fewer words, the Chinese industry will still have a growing demand in the upcoming five years, only slower in comparison with the actual one.
Gold and other metals prices will have the window same to keep raising if the investors have enough interest. The markets could receive this news as a bad one but notice that the domestic output will go down as well, making China buy more than before.
Numbers aren’t lying. The panorama remains very positive. With a decreasing production output and a still-growing demand, the country is headed to demand more metals during the five upcoming years.
The data at the beginning of this article is a valid proof. Domestic industry will have to demand more gold in comparison with previous years, where production was higher. This will directly influence commodities and mining stocks.
Investors also have to remember that China is suffering mineral shortages, partially caused by several mines’ closure. This is an important factor that will gain relevance in the upcoming years when the demand increases.