PHOTO: AFP/FILE

REUTERS, Singapore

President Xi Jinping is trying to wean China off its property-based, debt-fuelled economic model. The transformation will cool growth in the world’s second-largest economy after years of rapid development. Investors are worried but risk ignoring the structural changes underpinning the country’s continuing voracious appetite for raw materials.

Take the $300 billion copper market. China imports over 60 percent of the metal’s globally traded volume. “When it comes to copper, the thinking usually goes that copper equals property, property equals China,” said one commodities trader. “And because China property is down, copper must be down too.”

True, the country’s vast real estate sector, which powers a quarter of GDP and some 40 other sectors from construction to home appliances, is still finding a bottom. New construction starts by area have shrunk by another 23 percent in the year to October from an already battered 2022. Coupled with Beijing’s geopolitical fissures with the West, ranging from a technology race with Washington to its cosiness with Moscow and its position on Taiwan, investors are having cold feet about a broad set of Chinese assets. China recorded its first-ever quarterly deficit in foreign direct investment – $11.8 billion between July and September.

But two nuanced trends complicate the picture. First, as much as Xi frets about housing bubbles, he is still keen to prevent social unrest, given that ordinary Chinese store 70 percent of their wealth in property. That’s why he wants to ensure distressed developers like China Evergrande finish building the apartments that they have pre-sold to mortgage payers. By October, China still had about 8.2 billion square metres under construction – roughly 80 million typical three-bedroom homes. Copper tends to be used in a building’s late stages, so the potential demand loss arising from the property crisis is likely to be less severe than for iron ore, which is used more prominently at the start of construction.

Second, Xi’s mission to shift the country’s economic drivers from real estate to green and high-tech industries is accelerating. When China’s top leaders set priorities at the Communist Party’s twice-a-decade finance conference on Oct. 31, they explicitly asked that more financial resources go into these investments. That means state-owned banks will probably be guided to lend more to electric cars, wind and solar energy, artificial intelligence and advanced chips. Those industries need copper and other metals.

Thus, while the share of China’s “new economy” remains small versus the old growth engines, its rise is also creating