As Chinese GDP growth has slowed the narrative that Chinese commodity demand has declined has been repeated at nasaum. However, this appears to not be true. What has declined is the growth rate of Chinese commodity demand. The economics profession and investment world is addicted to growth rates and ignore gross figures. This is the fallacy of large numbers and I think distorts the truth. China currently consumes more commodities than it ever has, even as the growth rate has slowed. This is because China’s gross addition to GDP is larger each year, even though the growth rate slows.

As an example if an economy was $1 Trillion USD and grew to $2 trillion it has a growth rate of 100%. However, an economy of $10 Trillion that grows to $12 Trillion USD has a smaller growth rate of 20%, but added more GDP. This fixation on growth distorts the reality of what is happening in my opinion.

JPM Guide to the Markets Q1/2017