The question on the mainstream media’s lips right now seems to be ‘when will China go bust?’.
Just look at these headlines from the past week:
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| Source: MacroBusiness, Bloomberg, Reuters |
Now, to be fair, this is nothing new.
I think I’ve seen at least one doomsday prophecy about China every week for the past seven years. The media just loves to hate on the Middle Kingdom, probably because it gets clicks.
But I digress…
The point is, the media is making the China bust narrative seem more pronounced than it likely is. And don’t get me wrong, China’s economy has issues, just don’t expect it to ‘collapse’ like some suggest.
As Cal noted in yesterday’s Money Morning:
‘Another year and another fake China crisis has washed through the Aussie market, scaring everyone…and yet, there seems to be little signs of genuine financial distress anywhere. It’s almost a tradition now.
‘I told you last week that this was a chance to buy the dip. The market has rallied up since.
‘…Why is this so? Truth be told, I’m not 100% sure, except to say perhaps China is stronger than most presume.’
I think Cal’s right.
Not only is China stronger than most realise, but it’s also driving gains in Aussie stocks…
The great pivot
Of course, the first thing that comes to mind when thinking of Chinese exports is iron ore.
The crucial commodity has formed the backbone of our trading relationship with China. Even with a struggling property market, iron ore has proved fairly resilient in terms of price and demand.
But that’s not what I want to talk about today.
Instead, what’s far more interesting for investors is our second-biggest export to China. Because historically, it has been liquefied natural gas — another one of our staple commodities.
In 2023 though, things have changed…
Thanks to a huge surge in demand in the first half of the year, lithium is now second only to iron ore. $11.7 billion was spent on this ‘white gold’ between January and June by Chinese buyers.
And to put this surge in perspective, you need to realise that just two years ago, this figure was only $470 million. In other words, in the span of roughly 24 months, China has increased its spending on lithium by 25 times what it used to.
Talk about a pivot in demand.
Here’s the kicker though, it’s not just Aussie lithium that China is buying. They’re trying to corner the entire market!
All the lithium
10 of the last 20 major lithium mines put up for sale were bought by China. Committing $12.3 billion to secure these prized assets in North America, South America, Africa, and even Australia.
They’re making damn sure they have a big stake in this lithium trend.
As for why, well, there are a few reasons.
Some argue that China is worried about being potentially boxed out of the market. If we see the US or its Western allies try to cut more ties with China, they may prevent them from getting their hands on lithium assets. So, perhaps China is simply trying to get ahead before this could occur.
Or this could simply be a self-interested strategy. China already leads the world in terms of EV production and demand. The vested parties in that supply chain may just be looking to secure their slice of the pie as the boom continues.
Or maybe, just maybe, China knows that lithium is going to be vital for decades to come. By dominating not only the mining of this commodity, but also the downstream processing and production, they could corner the market for themselves.
The rest of the world would, of course, be stupid to let China do that, but it could still happen.
It took a freak pandemic and a Trump-initiated trade war to put an end to the ‘made-in-China’ era of manufacturing. It may be far harder to do the same for lithium…
Short-term opportunities for investors
How all of these potentialities will play out or unfold is of course a mystery.
We may end up in a future that no one saw coming.
What I can tell you is that the mainstream is far too preoccupied with China’s downfall. This is then feeding into market sentiment and share price movements. A lot of which, as Cal rightly pointed out, has been wrong.
Now is the time to be buying, not selling. Still exercise caution, as the stock market is still fraught with volatility and risk.
But the opportunities in trends like lithium are far more important than another bogus story about some Chinese property developer you’ve never heard of.
That’s why Cal is using stocks like Liontown Resources [ASX:LTR] as prime examples of what’s going on. Because as he explains in full, right here, he sees five big opportunities for investors to jump on right now.
I guarantee you won’t be hearing about this sort of thing from any ‘normal’ financial outlet.
But that’s because they still think China is sinking. And I’m sure they’ll still be parroting the same cliched concerns in a year from now.
Don’t listen to the doubters.
Follow the real trends.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
