CHICAGO — China was the focal point of discussion for the first day of DTN’s Ag Summit in Chicago.
A speaker who a DTN official called America’s leading expert on the Chinese economy said there are worrying developments in the country that is the top buyer of U.S. agricultural products.
The growing risk in the economy is being masked by the 9.9 percent annual growth in China’s gross domestic product, said Nicholas Lardy, senior fellow with the Petterson Institute for International Economics.
China’s leaders have acknowledged that the economy has become imbalanced because growth in consumption is lagging behind growth in gross domestic product.
That’s largely because the amount of money Chinese people are saving has increased dramatically.
The average household saves about two-fifths of its after tax income, and a lot of that is being invested in personal real estate. About 10 percent of China’s GDP is being spent on personal property, which compares to six percent of U.S. GDP during the height of the U.S. housing crisis.
Lardy said China’s housing bubble will eventually burst, potentially cutting in half the growth in the country’s GDP. That would have a huge impact on how much grain and meat China imports and a corresponding impact on world crop and livestock prices.
Another speaker at the DTN conference was more encouraging.
David Nelson, global strategist with Rabobank International-Americas, said he doesn’t believe the U.S. Department of Agriculture’s estimates of China’s corn stocks.
China is importing too much and the price of corn in that country is too high to support the USDA’s 51 million tonne estimate.
Nelson said China could easily require 20 to 25 million tonnes of corn annually in the near future.
“Who knows when it’s going to take off, but when it does it’s going to be big,” he said.
Look for more detailed stories about the DTN conference in an upcoming issue of The Western Producer.
