MELBOURNE/SYDNEY Nov 9 China's incoming
leadership change is unlikely to spur fresh economic stimulus
measures anytime soon, according to global miner Rio Tinto
, which sells tens of millions of tonnes of iron ore,
copper and coal to China annually.
"The forces for a big stimulus are pretty limited," Rio
Tinto's chief economist Vivek Tulpule told reporters.
Earlier rounds of stimulus helped drive global iron ore and
coal prices to record highs. This in turn translated into
soaring profits for the likes of Rio Tinto and other
mega-miners, including BHP Billiton and Xstrata
Since then, an economic downdraft has seen Chinese growth
slow for seven successive quarters and left 2012 on course to be
the weakest full year of growth since 1999 -- albeit at a 7.7
percent clip that is the envy of developed economies.
The Chinese Communist party's week-long congress is due to
anoint a new generation of leaders, but is also an opportunity
for senior officials to hash out or defend policies.
Rio Tinto expects economic growth in China to rise to at
least 8 percent in 2013 and average 8-9 percent to 2015, a more
bullish view than the global miner's main rivals.
China is scheduled on Friday to release a string of data,
including industrial output and retail sales, expected to show
modest growth recovery in the world's No.2 economy.
Rio Tinto, the world's No.2 iron ore miner, sees Chinese
growth picking up from below 8 percent this year as a new
government in Beijing relaxes restrictions on real estate
investment and pushes infrastructure spending, which will drive
demand for steel and in turn iron ore, its chief economist said.
"On balance we're seeing some green shoots and an
expectation next year that the GDP growth rate will have an 8 in
front of it, at least 8 percent, maybe on the low side of that,"
Among those green shoots, he pointed to recent data showing
a pick-up in containers in ports and rail cargo turnover in
September, a rise in housing sales, and an increase in credit
from new financing sources.
Rio is sticking to its view outlined earlier this year for
Chinese growth to average 7-8 percent from 2015-2020 and slowing
to 5-6 percent growth beyond 2020, but said it was likely to be
a volatile path towards slower growth as the Chinese economy
evolves from being investment driven to consumer driven.
"There are some uncertainties about the future," he said.
By comparison, top global iron ore miner Vale
now sees China's economy growing at 6-7 percent a year over the
rest of this decade. BHP Billiton sees China's annual
growth averaging 7-8 percent over the next decade.
Rio Tinto sees Chinese steel production peaking at 1 billion
tonnes a year around 2030, slightly later than earlier forecasts
for it to peak at that level around 2025.
Tulpule warned that if the United States failed to find a
solution to the "fiscal cliff" it would not only shave U.S.
demand for commodities, but would have a bigger impact in terms
of contagion in financial markets, which would hit activity on
the London Metal Exchange, where trading of metals like copper
and aluminium has been driven by speculation.
The fiscal cliff refers to a $600 billion package of
automatic spending cuts and tax increases due to take effect
early next year unless Washington can negotiate a deal.
But Tulpule said the net impact on bulk commodities, like
iron ore, would be limited because if Chinese growth slowed
sharply as a result of the U.S. fiscal cliff, we would likely
see China step up stimulus spending swiftly.
"If we don't, then I think we would start to see some
negative effect on bulk markets," Tulpule said.