MORE investments will be needed to spur the growth of commodity imports into China as consumption has not been the limiting factor for the past 15 years.
A weak economy had cast a shadow on Chinese demand in recent years, Institute of International Finance head of China research Gene Ma said during a panel discussion at the Financial Times Commodities Asia Summit 2025 in Singapore.
Commodity players have seen Chinese imports shrink as economic growth slowed.
Prospects for China this year have not been the most positive, either, with the newly added element of geopolitical uncertainty. US President Donald Trump has been in the driving seat of this, imposing tariffs aimed at fixing trade deficits with China.
Global players have pointed the finger at household consumption being the root cause of weak demand for commodity imports. But Ma begs to differ, using comparisons of consumption and investment against gross domestic product to make his case for more capital investments.
“From 2011 to 2025, in the last 15 years, consumption has lifted China’s GDP by about 75% versus 35%-40% that is lifted by investment. In other words, the contribution of consumption to GDP growth in the past decade-and-a-half was almost twice that of investment,” said Ma.
The consumption factor had already been tapped out. Looking deeper, Ma observed that consumption by Chinese households was mainly on services and not goods. Because of this, a rise in consumption would not contribute to more imports.
And even if household consumption of goods increased, most of these would be made in China.
Boosting investments could encourage more commodity imports, especially if investments were strategically placed.
Ma cited examples of building more airports and nursing homes as cases for capital investment in China as it currently lacks these. These investments would require more imports of energy and iron ore.
China will continue to face geopolitical headwinds as the US looks to rebalance its trade deficit with the country.
An appreciation of the Chinese RMB against the US dollar could support the case for more imports of energy and commodities from the US, sans tariffs. But imports of US household goods into China would remain a challenge given higher costs of production in the US compared to China.
A tariff truce between the US and China is currently in place, with the US maintaining a 10% reciprocal tariff on Chinese imports until November 10, 2026.
China has in turn suspended all retaliatory tariffs on US imports, maintaining its 10% tariff on all US goods. It also committed to purchasing at least 12m tonnes of US soybeans during the last two months of 2025 and another 25m tonnes in each of 2026, 2027 and 2028.
But retaliatory tariffs on US energy imports remain in place. Tariffs on US coal, liquified natural gas and crude oil remain at 25%, 25% and 20%, respectively.
This will force Chinese players to look at other regions, like the Middle East for LNG and crude oil, should capital investments rise sharply under this volatile geopolitical climate.
