China not to blame for energy price spikes: Experts
While China’s rapid economic growth has indeed increased demand for commodities in general, the weak dollar and speculation are the real causes of the huge spikes in international commodity prices, not the so-called China factor, according to economists.
As a recent Economist article points out, the low prices of Chinese products, thanks to its low manufacturing costs, have contributed to stabilizing prices across the globe. “China helped to hold down inflation in developed economies not because its prices were falling, but because its goods were much cheaper,” the article said.
Some critics, however, insist on pointing the finger at China’s higher demand for oil and other commodities to put the blame on a country that is facing the daunting task of development, said Hua Min, director of Fudan University’s Institute of World Economy.
Indeed, China’s oil imports increased significantly in 2007, up more than 14 percent year-on-year compared with the 10 percent in the preceding year, when the Fed was complaining about deflation, not inflation.
The International Energy Agency published a report in 2005 saying the increase in demand from China and India can be well compensated by Russia’s increase in its oil exports, thus keeping the overall supply-demand situation unchanged.
The decision of the Organization of Petroleum Exporting Countries (OPEC) late last year not to raise production was also based on its reading that supply matches demand, which indicates that the accusation that China’s demand has pushed up prices does not hold water, said Zuo Xiaolei, chief economist with China Galaxy Securities.
The organization has since retained its stance that the supply and demand in the oil market is balanced, dismissing the rationale for increasing output.
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