The former chairman of Morgan Stanley Asia is warning that Canada’s resource sector is slowly being crushed by a seismic shift happening in the Chinese economy.
Stephen Roach tells BNN the world’s largest buyer of commodities is transitioning to a more consumer-oriented economy that will rely far less on manufacturing and construction to fuel growth. He says the new Chinese economy will no longer need to import such vast amounts of natural resources, and that has significant consequences for countries such as Canada.
“A nation like Canada faces a double-whammy: slower GDP growth [in China] and GDP growth that emerges having a much lower energy and natural resource content,” he said. “China’s not going out of the business of consuming resources, but the delta – the growth rate of resource demand – is certainly shifting downward.”
The plunge in commodity prices have accelerated sharply over the past year partly as demand from China has waned. Copper, for instance, has slumped about 20 percent over that timeframe. Roach argues most resource-based economies operated under the assumption that the drivers of the Chinese economy would remain essentially unchanged, but he says that illusion will soon be shattered.