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Chinese commodities bull to last says fund manager, but crisis ahead

Date: Tue, 14 Jun 2011 | Author: Paul Sanderson

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A leading fund manager has predicted that commodities prices are set to keep growing for several years due to Chinese demand.

But he also warned that the country could face a crisis as it tries to transform its economy.

Peter Csoregh, senior portfolio manager of Robeco’s Natural Resource equities fund told Reuters that there were likely to be tensions between China and the developed world for natural resources. He said: “Can they [China] double from here, can they triple from here? Sure they can. Is there enough oil or copper in the world to allow them to do that? No.”

He speculated that in the worst case scenario, China’s growth could be attracting indiscriminate investment.

“The black swan scenario is really that China is one big Ponzi scheme. They are pushing down the factory input costs to an extreme level to achieve a certain type of growth, but if you look at what they are spending the money on, are these really productive assets?”

Csoregh also warned that China was facing a crisis in trying to manage the transition from a cheap export-driven manufacturing economy to a higher value, more information-based economy.

He said: “That’s the bet you are taking on China. Can they manage that transition? Everyone extrapolates from the past, but it is not going to be that simple because they will start hitting constraint levels.

“But before they go into that crisis, the last thing they will do is spend even more. First we will have an explosion on the commodities side, then it will go down. So I say hang tight, stay long and when you see it go exponential that’s when you want to get out.”

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