Figure 1: WTI tends to track growth in China but with a lag of 12 months

Figure 1: WTI tends to track growth in China but with a lag of 12 months
Source: Bloomberg Professional (USCRWTIC and CLKQINDX)

It’s a similar story for aluminum and for copper, although these two industrial metals sometimes respond to changes in the pace of Chinese growth more quickly than crude oil (Figures 2 and 3). Thus far in the 2020s, copper prices have diverged somewhat from the pace of growth in China owing to strong demand for the red metal stemming from the energy transition, and limited supply growth. By contrast, the price of aluminum appears to adhere closely to what’s been happening in China. 

Figures 2 and 3: Aluminum, copper prices also tend to follow changes in the pace of China’s growth

Figures 2: Aluminum, copper prices also tend to follow changes in the pace of China’s growth
Source: Bloomberg Professional (ALE1 and pre 2021 LA1 and CLKQINDX)
Figures 3: Aluminum, copper prices also tend to follow changes in the pace of China’s growth
Source: Bloomberg Professional (HG1 and CLKQINDX)

It’s a similar story for the agricultural markets. Corn and wheat, for example, also tend to follow what’s happening in China but with slightly longer lags of 12-18 months (Figures 4 and 5).

Figures 4 and 5: Corn and wheat prices have followed Chinese growth with a lag of slightly over 1 year

Figures 4: Corn and wheat prices have followed Chinese growth with a lag of slightly over 1 year
Source: Bloomberg Professional (C1 and CLKQINDX)
Figures 5: Corn and wheat prices have followed Chinese growth with a lag of slightly over 1 year
Source: Bloomberg Professional (W1 and CLKQINDX)

The same can be said of soybeans and soybean oil (Figures 6 and 7):

Figures 6 and 7: Soybean & soybean oil futures often follow the pace of growth in China

Figures 6: Soybean & soybean oil futures often follow the pace of growth in China
Source: Bloomberg Professional (S1 and CLKQINDX)
Figures 7: Soybean & soybean oil futures often follow the pace of growth in China
Source: Bloomberg Professional (BO1 and CLKQINDX)

Most famously, China’s 2009 stimulus generated a powerful bull market that peaked in late 2011 for oil and industrial metals, and in 2012 for the agricultural products. Oil prices rose from below $40 per barrel to above $110. Copper prices rose from $1.30 per lb to over $4.60. The prices of most agricultural goods roughly doubled.

The 2009 stimulus differed in key aspects from the current one. First, it was much larger as a share of GDP. Between 2009 and 2010, non-financial corporate debt rose by 35% of GDP as the government encouraged a massive infrastructure building program (Figure 8). Thus far, the announced stimulus measures amount to about 3.6% of GDP, making it about one-tenth the size of the 2009-10 effort relative to the size of the economy.  

Figure 8: China’s 2009 stimulus was large and occurred in a relatively low-debt environment

Figure 8: China’s 2009 stimulus was large and occurred in a relatively low-debt environment
Source: Bank for International Settlements, Total Credit to the Non-Financial Sector Database (Q:CN:H:A:M:770:A, Q:CN:N:A:M:770:A, Q:CN:N:A:M:770:A)

Second, the 2009-10 stimulus was meant to deal with the global financial crisis, which was exogenous to China. By contrast, the current stimulus is meant to deal with the endogenous problems of falling real estate prices, reduced consumer confidence and spending, weak finances on the part of local governments and property developers, and undercapitalized lenders. In fact, China’s lenders have total balance sheets that add up to nearly 200% of GDP (Figure 9), far higher than bank leverage ratios elsewhere. 

Figure 9: China’s banks are exceptionally highly leveraged relative to the economy

Figure 9: China’s banks are exceptionally highly leveraged relative to the economy
Source: Bank for International Settlements, Total Credit to the Non-Financial Sector Database

Third, higher debt ratios in the non-financial sector may also limit the effect of the stimulus measures. When the 2009-10 stimulus measures came into effect, the overall debt ratio was close to 140% of Chinese GDP – much lower than in Europe or the U.S. Today, China’s non-financial (or non-bank) leverage ratio is close to 300% of GDP, higher than in Europe or the U.S. (Figure 10). When debt ratios are low, additional borrowing can quickly add to the investment and spending components of GDP. By contrast, when debt ratios are high, additional borrowing often serves to refinance the existing stock of debt rather than add to the investment or spending components of GDP. Indeed, that seems very much the case with the existing stimulus proposals: allowing local governments to issue bonds to consolidate the debt of property developers onto their books and adding to the national public debt to boost the capital of the nation’s largest banks. This closely resembles what countries like the U.S., Ireland and Spain did in the 2008-2010 period. While such measures halted the economic downturn, they didn’t produce a particularly strong economic recovery. 

Figure 10: China’s non-financial (non-bank) sector is highly leveraged

Figure 10: China’s non-financial (non-bank) sector is highly leveraged
Source: Bank for International Settlements, Total Credit to the Non-Financial Sector Database

Finally, there is the issue of interest rates. While it is true that the PBOC has been cutting interest rates, it’s equally true that China’s core inflation rate has been falling. In fact, the gap between the PBOC’s policy rate and core inflation, which has been relatively stable over the past few years, is wider than it was at times in the past (Figure 11). This suggests that real rates in China have not in fact fallen and that monetary policy is China is not particularly easy for the moment. Giving a larger boost through monetary policy might require rates to move much closer to zero, but near-zero rates in China might also create pressures for capital flight and a weaker yuan which might make the PBOC reluctant to ease policy too much too soon. A sharply weaker yuan could fuel a protectionist backlash against China. 

Figure 11: PBOC policy rates remain high relative to core inflation

Figure 11: PBOC policy rates remain high relative to core inflation
Source: Bloomberg Professional (CHLLM1YR, PBOC7P, CNDR1Y, CNCPCRY)

A large part of the reason why commodity prices have been depressed despite conflicts in the Middle East and war between Russia and Ukraine is the weakness of Chinese demand growth. If China manages to halt or reverse the slowdown in its growth rate, the world could wind up with higher commodity prices. That said, the jury is still out on the degree to which China’s latest stimulus will boost growth. 

Trading crude oil

Express your views on market shifts in crude oil prices nearly 24 hours a day, six days a week.


Erik Norland
Erik Norland
Erik Norland, Managing Director and Chief Economist, CME Group

is responsible for generating economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their potential impact on CME Group's various asset classes, ranging from interest rate products to energy and agriculture. He is also one of CME Group’s spokespeople on global economic, financial and geopolitical developments.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2025 CME Group Inc. All rights reserved.