China 5 year plan and new one belt one road Policy makers are seeking to shift the economy away from investment-led growth to one driven by consumption, prompting a slowdown in construction. A measure of returns from commodities sank last month to its lowest since 1999 on concern that a slowing China will exacerbate supply gluts.
China’s targets of about 50 gigawatts a year of renewable and natural gas capacity additions will displace more than 300 million metric tons a year of coal demand by 2020, Citigroup said. A push for increased new energy vehicle usage will boost copper consumption, while gasoline demand, and to a lesser extent diesel and natural gas, are likely to suffer, the bank said.
Real estate will also feature prominently in the plan given its importance to the Chinese economy, the analysts wrote. The government’s withdrawal from social housing construction will curb the use of metals such as steel, copper, aluminum and zinc, according to Citigroup.
It’s not all bad news for industrial commodities. The building of roads and railways linking China to markets across Asia, Africa, the Middle East and Europe under the “One Belt, One Road” initiative will lift demand in the medium and longer term given the massive transportation and energy infrastructure needs in some countries, Citigroup said.