LAUNCESTON, Australia (Reuters) – Commodity markets appear to have delivered their verdict on China’s plans to stimulate its economy, betting that Beijing’s boost to infrastructure spending will work.
China’s central bank cut the amount of cash that banks have to hold as reserves for a fifth time in a year on Jan. 4, a move that will free up as much as $116 billion in new credit.
The looser monetary policy announcement came two days after the national rail operator said it planned 6,800 km (4,225 miles) of new track this year, a 40 percent lift on what was laid last year.
This implies a substantial hike on the 802.9 billion yuan ($117.2 billion) invested in rail in 2018, cash that will flow through to increased demand for steel, copper and also for coal used to provide energy to process ores into refined metals.
Certainly, the prices of these commodities have improved in recent days, taking heart from Beijing’s stimulus, and also from some renewed optimism that progress is being made to resolve the U.S.-China trade dispute.