CHINA'S demand for commodities is set to level out in the coming years, famed contrarian Marc Faber has warned, while China's ongoing reliance on commodities imports is likely to add to geopolitical tensions throughout Asia, the Middle East and Africa.
Dr Faber, the author of the Gloom, Boom and Doom report and a regular
speaker on the conference circuit, told the Mining Indaba forum in Cape
Town that credit growth in China was beginning to grow at a much faster
rate than growth in gross domestic product, with potentially negative
implications for commodities demand.
"I think oil consumption in the world will continue to go up, but for
some industrial commodities like iron ore and copper, China has probably
reached a level where demand may not contract, but won't go up
dramatically," Dr Faber said.
Sporting his trademark ponytail and a bright pink tie, Dr Faber noted
that while credit in China had grown at about the same rate as GDP
between 2000 and 2007, since 2008 credit had grown at a much faster
Much of that credit growth had been "misallocated" into an overinflated
Chinese housing market, potentially sowing the seeds for a future
economic crisis in the country.
"I think they (Beijing) can again postpone a crisis, but this is
probably the last time they can do it. After that, economic growth will
come under a lot of pressure," he said.
"I would assume that the Chinese economy will grow at a much, much
slower pace in the next 10 years . . . and this will have an impact on
the demand for raw materials."
Dr Faber also said he was concerned about the geopolitical implications
of China's reliance on oil imports through the Straits of Malacca and
the strategic vulnerabilities that come with that.
"What would you do if you were a military strategist in China and you
knew all the oil (being imported into China) comes through the Straits
He warned of rising tensions throughout Southeast Asia, the Middle East
and Africa as China looked to shore up its commodities supplies and
"I think there will be on this continent a lot of struggle over resources. We have to live with a lot of volatility," he said.
Dr Faber repeated his long-held belief that money-printing by
governments around the world made gold a must-have investment. "I would
have 25 per cent (of my investment portfolio) in equities, 25 per cent
in bonds, 25 per cent real estate, 25 per cent gold and 25 per cent
cash," he said.
"I know it doesn't add up, but I have now the accounting standards of US Treasury."
He said investing in gold and other precious metals was vital. "I would
strongly advise you, for your children and so forth, don't keep your
money in cash. "I'm not saying rush out the door and buy gold, I'm just
saying that over time it's likely that, as has happened throughout
history, paper money has always lost value."