A Barometer for China’s Economy Looking Strong Despite Property Woes

• Iron ore, a commodity often associated with growth and economic activity in China, is rallying.
• Sustained demand could mean the nation’s economy isn’t completely in the dumps.
• Data in recent weeks shows China faces debt, deflation, and key demographic issues.

China’s economy may not be completely in the dumps, judging by prices for a key building and manufacturing commodity that often moves on demand from Chinese firms. 

Iron ore prices have stayed hot for most of 2023, despite the turmoil that’s currently unfolding in China’s real estate market. Some of China’s largest property developers are verging on collapse as consumer confidence in the sector wavers—but iron, a material critical to construction and manufacturing, recently rose to a four-week high, and prices have stayed above $100 per ton for most of 2023, according to Bloomberg data.

The precious metal is traditionally associated with growth in China’s economy, according to JPMorgan strategists, given that nation is one of the world’s largest iron ore producers. And the rally seen in the precious metal could be sign that demand hasn’t crumbled across all sectors of China’s economy, though its property market continues to struggle.

That’s partly due to continued demand for things like power machinery, cars, and shipping materials, which has partially made up for fallen iron demand in property construction, according to a recent statement from BHP Group, one of the world’s largest mining firms.

The rally has also been helped along by other market factors, like a 25% increase in railroad spending through the first half of the year, and firms loading up on iron ore to prepare for a post-summer construction boom.

Still, scholars have warned that China’s economic malaise could drag on as the nation continues to be weighed down by high debt levels, deflation, and an aging population. That could result in a lost economic decade, some experts say, a period of stagnant growth similar to the one that slammed Japan’s economy in the 90s.