China’s construction sector starting to slow

It wasn’t all that long ago that the experts were saying the mining boom still had another 20 to 30 years left. How quickly things can change. Just as expected, if the world starts tightening it’s purse strings, demand for product from China has to contract. Couple this with an attempt to curb inflation by tightening credit, and this downturn starts to become quite sharp. Real Estate sales in China are also falling at rapid paces.

It doesn’t look all that positive for a country that was suppose to “save” Australia.

Worryingly for Australia, the Chinese construction sector, which drives demand for commodities like iron ore, is also entering a sharp downturn, after nearly a year of tight credit rationing by the central bank to fight inflation.

Caijing Magazine reports that real estate sales volumes have plunged 50% this year in key cities including Shanghai, Shenzhen, Wuhan and Xiamen.

The construction slump is feeding directly into prices of steel and, therefore, iron ore.

“The economy is heading for a downward slide, so the steel industry is certainly heading for a downward slide,” Baosteel chairman Xu Lejiang said this week.

» China’s construction sector starting to slow – The Age, 2nd October 2008.