As China pours some cold water on its economy to prevent overheating, the prices of raw materials are falling along with Chinese stocks. West Texas Intermediate light, sweet crude oil futures fell 4.33 percent to $72.49 per barrel at 11 a.m. EST. Copper futures, closely tied to industrial consumption and economic growth, fell 2.36 percent to $2.881 per pound.
Traders, economist and officials have been counting on China, as well as other emerging markets, to drive economic recovery across the globe. Unfortunately, most of the other nations derive their own growth from exports to China and the developed world.
Take Brazil as an example. With massive reserves of raw materials and commodities like steel, soybeans, sugar and oil, it has dragged itself up from an inflation-wracked economic basket case to one of the biggest developing economies. However, much of its prosperity depends on Chinese consumption of those commodities to drive export growth.
China, for its own part, is conducting a delicate balancing act between growing its economy and maintaining an increasingly strained social network. Pollution, a weak yuan, income inequality and corruption are becoming more and more problematic. China has to make sure that it continues to create new jobs for rural farmers migrating to urban centers while still maintaining central control over commerce and simultaneously appeasing a newly empowered and affluent middle class.
It’s not going to be easy, and China’s efforts will reverberate through every market on the planet.
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