Rio Tinto Says China Shows 'Positive' Signs of Growth as Industries Expand

Rio Tinto Group, which gets almost a quarter of its revenue from China, said the East Asian country has begun to show “positive” signs of growth again as its manufacturing and construction industries recover. “Two months ago there were jitters in financial markets about the sustainability of Chinese growth,” Vivek Tulpule, chief economist for the world’s third-biggest mining company, said today at a briefing in Melbourne. “Since then signs have turned more positive. China is surprising us again on the upside.’’
While China’s economic growth cooled to an annual 10.3 percent in the second quarter from 11.9 percent in the first, manufacturing, trade and construction are now rebounding, Tulpule said. China last year became Rio’s biggest customer, surpassing North America and Europe. The London-based company is the world’s second-largest exporter of iron ore.

China lowered benchmark borrowing costs and implemented a 4 trillion-yuan ($600 billion) spending package in the past two years to shield the economy from the global financial crisis.
“Resource companies continue to see the benefits from this stimulus in very strong prices right now for almost all of the commodities we produce,’’ Tulpule said, according to notes of his speech. Commodity prices last week soared to their highest in almost two years after the U.S. cut its crop-supply forecasts and the dollar slumped.
Iron Ore Consumption
Demand growth for iron ore, a steelmaking ingredient, may resume at the end of next year, according to Vale SA, the world’s largest exporter of the material. Spot iron-ore prices have gained 24 percent to $145.30 a metric ton from their 2010 low in July, according to the Steel Index.
Still, China’s growth will decline on average over the “next several years,’’ Tulpule said. It may slow to between 6 percent and 7 percent toward the end of the decade, compared with about 9 percent this year, he said.
China faces demands from Western nations to let the yuan rise more quickly at a time when the U.S. is trying to trim its trade deficit and European nations are seeking to stem an outflow of manufacturing jobs.
China’s currency is and may remain undervalued as the nation’s productivity improves, Tulpule said. “The implication is that the currency will almost certainly appreciate in real terms over the next few years -- probably substantially,’’ he said.

Source: Bloomberg