Australia's rising prices to restrain China's demand for resources

Chinese demand could be restrained if the prices of Australian resources continued to rise, and Australia's export and economy could be severely affected, an expert warned on Wednesday.

The expert on the Chinese economy, Arthur Kroeber of research firm Dragonomics, said higher prices could force Chinese industries turning to the substantial stockpiles they are believed to have built up.

"Once the price gets up to a certain level -- whatever that is -- China can easily stop buying and start running down their stockpiles," Kroeber said.

China's economy had been growing at seven to eight percent so far in 2009 but, in Australia, this growth must have seemed much stronger because the growth had almost all been driven by resource-intensive investment, Kroeber said.

"From Australia's prospective, it feels like China is growing at 11 or 12 percent because of the level of investment," he told Australian Associated Press.

China is now Australia's largest trading partner.

The strength of China's demand for Australian resources was a key factor that helped Australia avoid the recession suffered by other major economies this year, he said.


Source: Xinhua