May 4, 2004
By Veronica Brown

LONDON, (Reuters) - China's hunger for raw materials will drive further demand for commodities such as metals despite worries that the country's economy might overheat, a panel of mining specialists said on Tuesday.

Metals prices fell sharply last week, with China seen as the chief cause amid increasingly stringent measures being implemented by Beijing to stop the economy overcooking after it grew 9.1 percent last year.

But the panel said last week's losses were no cause for panic, and rather proof that the country was in a substantial economic cycle lasting more than 15 years.

"There are only a few sectors in China that are truly overheated...there are very large sectors of the economy that are not overheated at all," Ivanhoe Mines Ltd Chairman Robert Friedland told delegates at a mining forum in London.

"It's very hyper, extremely bullish...that the Chinese prevent a bubble and there's absolutely no doubt that they will be able to do so," he said.

Frank Holmes, chairman of fund manager U.S. Global Investors, said talk of a bubble in China was premature.

"People are calling everything that goes through a dramatic turning point a bubble," he said.

"There are so many different cycles to appreciate when it comes to natural resources. China is going through a huge cycle, while the U.S. is going through a four-year presidential cycle," he said.

Holmes said China's rapid growth was driven by large-scale industrial production, which marked a major transformation.

"China is going through another transition...They are doing everything to build up the rural community," he said, referring to another factor in Cina's economic growth.

"We are in a great, wonderful secular bull market for all commodities...it's going to be volatile," he added.

Jack Jones, executive director of international mining at CIBC World Markets, a unit of Canadian Imperial Bank of Commerce, said China had been highlighted as a major concern but that some major mining groups were upbeat on the overall demand picture.

"There clearly is potential for a structural as well as a cyclical upswing for commodities," he said, adding that sustained Chinese economic growth appeared key for risk reduction.

http://biz.yahoo.com/rm/040504/minerals_china_demand_2.html