From Morgan Stanley economist Stephen Roach's March 27th essay:
China is sending the world an important message: A key mid-course correction in its development model is coming — a shift away from export- and investment-led growth to more of a consumer-driven dynamic. This change will not be abrupt but it will be an increasingly dominant characteristic of the Chinese growth outcome over the next five years. It is aimed, first and foremost, at providing greater stability to the Chinese economy. It will also have profound implications on the global economy and world financial markets...
Three potential impacts strike me as most important:
* Commodity markets. A reduction of investment growth is likely to temper China’s impact on the demand side of many industrial commodity markets. In 2005, China accounted for around 25% of worldwide demand for aluminum and about 30-35% of global consumption in copper, iron, steel, and coal. As the pace of Chinese industrial activity slows in the years ahead, pressures on the demand side of industrial materials markets should ease — underscoring the downside risks to commodity prices at just the time when most investors have concluded that there will be no stopping the upside of a “super commodity cycle.