China's 'insatiable' demand brings inflation risk

By Steve Hargreaves, senior writer


HOUSTON (CNNMoney) -- China's massive building boom shows little signs of slowing, bringing with it a huge appetite for raw materials -- and the threat of inflation

That's the outlook from Jing Ulrich, head of China equities and commodities at J.P. Morgan, who spoke at an oil industry conference Monday.

Ulrich said the government plans to build 36 million units of low-cost housing over the next five years. China is also pushing ahead with a plan to build nearly 10,000 miles of high speed rail over the next five years, spending $150 billion a year on the project.

"How much raw material, how much energy is required," said Ulrich, speaking at the IHS CERA annual conference, one of the biggest energy conferences worldwide. "Does the world have enough copper, enough oil to supply China's insatiable appetite?"

But the building boom comes with a dark side: inflation.

Food prices are now increasing at an annual rate of 10%, while wages for factory workers jumped 20% to 25% in the last year, said Ulrich.

To combat inflation, she believes the government will continue to tighten lending policies and let the currency appreciate at a rate of 5% to 6% this year - roughly double last year's pace.

The health of the global economy and demand from emerging markets is a key driver for energy prices, particularly oil.

Ulrich made no mention of the recent events in the Middle East, which have helped push crude prices up over $100 a barrel in the last couple of weeks. Several Middle East experts and executives from Persian Gulf oil companies are slated to speak at the conference Tuesday.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.99%4.00%
15 yr fixed3.06%3.10%
5/1 ARM3.20%3.19%
30 yr refi3.99%4.08%
15 yr refi3.07%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,827.75 12.81 0.07%
Nasdaq 4,787.32 29.07 0.61%
S&P 500 2,072.83 5.80 0.28%
Treasuries 2.23 -0.03 -1.15%
Data as of 12:52am ET
Company Price Change % Change
Kinder Morgan Inc 42.32 0.00 0.00%
Apple Inc 119.00 0.00 0.00%
Facebook Inc 77.62 1.99 2.63%
Pfizer Inc 31.10 0.00 0.00%
Bank of America Corp... 17.11 0.00 0.00%
Data as of Nov 26

Sections

The European Parliament has voted to break up Google and weaken its dominance across the region. More

Two pilots encountered drones while flying over college football games and another pilot saw one while flying over the Hollywood sign. More

Natalie's Cakes and More has raised $84,000 through GoFundMe after protests trash store. More

Retailers are promising big deals this Black Friday, but are the savings actually worth the shopping mayhem? Test your deal-sniffing skills. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.