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Not only has the Chinese economy slowed substantially in recent months, but there has also been a profound change in mood. However, despite the factory closures, plunging exports and many areas of production falling off, the country remains a "locomotive of resource demand," according to Kobus van der Wath, group managing director at The Beijing Axis, an advisor to Chinese capital and mining companies in China.

While there will be a painful economic adjustment in the near term, the "search for the Chinese consumer" - middle class and urban populations that are growing as citizens flock to cities - will serve as a buffer and help the country outperform in terms of global growth for the medium and long term, Mr. van der Wath said at the 2009 Prospectors & Developers Association of Canada (PDAC) conference in Toronto.

"We are in the midst of a very soft spot in the economy," he added, citing a weak property market, plunging stocks, lower consumption and tight credit markets.

Mr. van der Wath noted that both the media and the Chinese government are passing on this type of bad news to the world and the public for the first time. While what happens in the United States and Europe is key, particularly for those who agree that China cannot decouple and become a free-standing economic entity, social and financial stability is of the utmost importance, and the government's stimulus plan reflects these goals.

Mr. van der Wath suggested that the resource need will remain but it won't be a silver bullet. However, themes like modernization, industrialization and urbanization will offset the negative news flow in coming years.

The Beijing Axis forecasts GDP growth of 5.6% in 2009 and 7.5% in 2010, but acknowledged the downside risk to these estimates. So while China is not going to unravel, it will grow at lower rates, Mr. van der Wath said.

He noted that China has surpassed the U.S. in many categories and is now the world's largest consumer of commodities like zinc, nickel, copper and aluminum. The construction industry that is being driven by this mass migration to cities will come in three waves, he added, as the trends evident in the population-dense east shift to the central and western regions of China.

Mr. van der Wath noted that China is inextricably linked to the global economy as it has heavily boosted various forms of investment in foreign countries over the past five years. But it is still in the early stages, he added, citing some staggering statistics.

China's non-financial foreign investment has grown from US$700-million in 2001, to US$24.8-billion in 2007. Last year, that figure jumped to US$40.5-billion and was US$25-billion in February alone.

"This is one of the most important trends currently unfolding in the sector," Mr. van der Wath said, adding that surveys show executives intend to go global. "Chinese CEOs are thinking differently."

As a result, he thinks parts of Africa, Australia and Canada have a higher likelihood of attracting Chinese capital.

Jonathan Ratner