Are commodities being driven up by Chinese demand or has China been powered by cheap commodities? The story goes as follows:
- High growth in China increases the demand for commodities, such as oil
- The increased demand increases the price of commodities
- A spike in commodity prices hurts Chinese growth prospects
- Slower growth decreases the price of commodities
- Rinse, repeat…
Since Fall there has been a dramatic shift in the relationship between the two with it looking like China’s success may have indeed been enabled by cheap commodities (cheap labor is not enough when commodities spike).
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjF50Zr6BVX5uGDkjzj1B9QSc1aNdulFPjsUBb8q8VK8QYGaT-F66_7oUAB9IK4N3MTVr4g6RGX6V33RQxBaQZcD1fyzgfbQV2bzrTjamx8nhiBI7BTocG-FIkWJb6F94pZuUKJoTz5TmE/s400/China2.png)
Without a rapid decline in the price of energy and/or other related commodities, it will become cheaper for many companies to move production closer to home, rather than utilize China to create goods at a cost struggling US consumers may no longer be able to afford.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJiLXGQcxJ8iky44ouseIuWROly4Gcze1j9PO3yDIoA5H9fT_sUXWlJxhqpUxdGJGKT-q_kfjmfECPY3Yj2jgJoO_1nWZBk-s2fMlJqco-DFD0e9W1SD3JUedf7WCO3Qn3U3onRWdQd4A/s400/ChinCommv1.png)
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