April 12th, 2010
08:34 AM GMT
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Hong Kong, China – The leadership of the world's largest aluminum producer believes metals prices are making a comeback in 2010.

"We are bullish," Vladislav Soloviev, first deputy CEO of Rusal, told me in Hong Kong.

Demand, he believes, is strong, especially in China. The recovery in prices helped turn around his company's fortunes in 2009.

China's demand for commodities has been all over the news as of late. The country posted its first trade deficit in six years in March mainly because of the surge in imports of raw materials. Exports dropped because Chinese factories were slow to reopen after the Lunar New Year holiday.

The trade deficit is complicating the debate over the Chinese currency. Beijing has been under pressure to loosen its controls on the yuan, which many in Washington believe is set too low and contributes to the big U.S. trade deficit with China.

Soloviev believes Beijing will make a move this year. But unlike those in the manufacturing sector, he thinks a more flexible currency will give him a competitive edge.

Do you anticipate China will ease its currency controls soon?  If so, what does that mean for your business?



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soundoff (9 Responses)
  1. marc

    I still always tell clients that I have that if they really want something they should pay the price being asked for it, rather than risking losing it in a bidding situation. China is following this advice to the letter insofar as natural resources go. If they need commodities in order to continue building and manufacturing they are acquiring pretty much whatever they
    need or want. Very good for some, not so good for others, but the way that all of their money allows them to conduct business. I admire their tactics but am very worried about the coming consequences.

    April 12, 2010 at 5:47 pm |
  2. BSTeh

    Fortunately or otherwise, China's population has always been a feature of its history. To put into perspective, by AD 606 China's population was 46 million compared with 18 million for the major nations in Europe ( Greece/Balkan, Italy, Spain/Portugal, France/Low Countries, British Isles, Germany/Scandinavia, and Slavia/Hungary ). Source: Rodzinski/J.C.Russell.

    By AD 1126, China's population reached 100 million while Europe's reached 56 million.

    It has presented China with a conundrum as complex and ancient as the basic Taoist tenet of 'what is , is not'.

    In modern management precepts, it means that China's population represents both a strength and a weakness. With a per capita income of +$3,000 China's current purchasing power is already generating tremendous velocity.

    With an expected further increase in her per capita income, the prospects for future business environment appears to be very positive. Question is for who?

    My guess is that the whole world will benefit if the Keynesian theory of the multiplier effect works. What about the Chinese currency then?

    My guess is that China will have to lift its currency control soon but it will do so gradually without disrupting its economic growth. A stable economic environment will benefit all trading partners and effectively all economies to their varying extents.

    Another benefit of China's growing involvement in the manufacturing sectors is to spur the advancement of science and technology particularly in the advanced economies. This will change the global economic landscape and accelerate its dynamics and matrix.

    April 13, 2010 at 9:43 am |
  3. JLW

    China is in a strong position and has the ability to stand firm regarding its positions and policies. It views the US, its major trading partner, as weak, it's President naive, indecisive and weak.

    April 17, 2010 at 4:11 pm |
  4. Strangewalk

    China's policies in modern times have swung from one extreme leading to disaster, to an opposite extreme in an attempt to deal with it that nonetheless ushers in another disaster. Now is no different. China's rigid currency regime has led to unsustainable fiscal and trade instability, with huge imbalances everywhere in the world.
    Prompted by Mao, China's population, already the largest in the world, doubled in a mere 10 years between 1966 and 1976. The implementation of the one-child policy as a necessary result guarantees that China will soon face a demographics aging disaster.

    In just the past 15 years China has accomplished the near total destruction of much of it's natural environment leading to an unsolvable water shortage and is caught in a dirty energy trap that will get much worse.

    China's reaction to the financial collapse has been to spur artificial growth through money creation at a scale that would make Ben Bernanke blush, and it's led to monstrous real-estate and commodities bubbles, and a fixed asset dilemna that can only end badly.

    The hundreds of millions of factory workers comprising the backbone of China's export manufacturing sector that existed in vast, Gulag-like squalor, were never paid more than sustenance wages. Now many them have returned home, to now non-existent or highly polluted farms and have become part of the huge underclass.

    Now it's China's goal to fast-track the construction of 10 nuclear power stations per year for the next 10 years. If you knew what I do about the corrupt building inspectors there, I can guarantee you wouldn't want to live next to one.

    The China phenomenon is a phony illusion, more like The Great Leap Forward on steroids. China will not lead the world to a new level of prosperity and higher civilization. It is dragging us into the depths of an unimaginable hell.

    April 18, 2010 at 10:16 pm |
  5. Peter

    Much posturing and wingeing by self-interested parties in and out of China obscure the fundamentals that drive the terms of trade and will eventually force the adjustments that normal exchange markets are designed to do in a more orderly fashion. But like Japan's MoF in the 1980s, the leadership in Beijing today have a vested interested in preserving the status quo, the illusion of control they need so desperately to maintain to their people (and to their critics). But Beijing has never been in true control of China, even in 1949 when this particularly Dynasty was born. But for better or for worse, RMB revaluation may be the only way to ease the massive speculative forces that are rampant in the economy, bankers turning over their entire loan books by selling them off to trust companies that in turn sell them to retail investors. This is the "China Syndrome" that connoisseurs of Chernobyl and Three Mile Island recall, the meltdown that burns right thru to the ends of the earth. Almost surely, the effects of a credit bubble run amok are worse – for us all – than a robust revaluation.

    April 19, 2010 at 10:35 am |
  6. Smith in Oregon

    China cannot eat Aluminum nor drink it and soon they'll be unable to feed nor supply many of their people with fresh water.

    Perhaps China should strongly consider leaving Tibet and letting Tibet achieve its independence before drought swallows up most of China.

    April 20, 2010 at 8:11 am |
  7. Phil

    China has nothing to offer the world except junk, and the world is dumb enough to buy it. Sick, sick, sick......

    April 25, 2010 at 8:50 am |
  8. DK

    Hey, phil, it is hard to buy American even from an American Company.
    I had to send to away for an US made flag because I could not find one locally.
    And I don't mean to offend anyone, but at least lets make our flags at home.

    April 29, 2010 at 10:17 am |
  9. Ken

    Just some observations: 1. Like water, all resources are limited.
    2. For 1.4 billion people with a GDP of (say) 4 trillion to catch up to a world of 700 million (say Europe and the USA) with a combined GDP of (say) 20 trillion will take a lot of resources (remember the only competitive edge a country has in buying resources "outside" is price.). 3. When a country believes that it "must" grow at a ten percent rate to keep the population happy and under control, it, as a correlary, "must" buy resorces. This economic equation "will" lead to a devaluation of the RMB through pricing alone. 4. This spells disaster with more and more monetary equivalents chasing limited resources.

    May 5, 2010 at 11:54 am |

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