Believers like BHP in China's economy, and the stimulus it brings to countries like Australia, remain steadfast even as the country's property sector groans under bad debts and failures, and the government outlines even more financial support.
Iron ore prices this week hit five-week highs of more than $US121 a tonne (on the SGX futures market) on Wednesday – that's up around 5% in a month as BHP's annual meeting in Adelaide heard an upbeat outlook on China, which is the company's and Australia's biggest customer.
The optimism from BHP CEO Mike Henry came the same day as the private survey of small and medium manufacturers found that activity last month had drifted back into contraction with a reading of 49.5 (50 marks the line between contraction and expansion).
That matched the reading on Tuesday from the government's official activity survey of large businesses.
Henry had a message for shareholders that was similar to those in the annual report in August: China's demand for commodities, including iron ore and copper, remains robust, even as the country's economic recovery disappoints and its property sector struggles.
Henry said China's appetite for copper, used widely in manufacturing and construction, is even stronger than the world's largest miner by market value was anticipating six to 12 months ago, and that economic headwinds haven't translated into reduced commodity demand more broadly.
Chinese authorities have stepped up stimulus talk and some measures aimed at boosting consumer spending and shoring up China's troubled property market.
These were measures cited by Citi analysts this week as a tailwind for iron ore prices as they upgraded their own short-term forecast for the steel ingredient.
Citi said this week that it saw iron ore prices reaching $US130 a tonne by the end of the year – judging by this week's rise, it's on the way, especially with the Chinese government increasing talk this week of support for the economy and for property.
Still, Henry cautioned that China's economic outlook continues to be murky as the latest data stokes concerns about the fragility of its recovery.
But he said after the meeting that "There have been some green shoots over the past couple of months, but also some things that clearly aren't progressing as quickly as some would hope for… So the jury is still out a little bit in terms of how quickly things recover."
Long reports of a two-day meeting on Monday and Tuesday in official state media in China on Tuesday and Wednesday set out the financial and economic aims for China for the next few years. And amid all the usual tosh about how wonderful things are in China and how tough the government will be, two paragraphs stood out:
"Efforts should be made to establish a long-term mechanism to guard against and defuse local debt risks, set up a government debt management system that is compatible with China's pursuit of high-quality development, and optimize central and local government debt structures, according to the meeting.
"China will promote the virtuous development cycle between the financial sector and the property sector, improve the macro-prudential management of real estate financing, and satisfy the reasonable financing demands of real estate enterprises of different types of ownership."
Western analysts and economists took those comments as a sign China will support property developers and the resolving local government debt problems – both of which are the two major problems facing the economy and the financial system.
"Policymakers emphasized that private and state-owned property developers would be treated equally and their reasonable funding demands would be satisfied," Goldman Sachs' analysts said in a report published Wednesday.
"Policymakers would establish long-term effective mechanisms to resolve local government debt and 'optimize the structure of central and local government debt,'" the report said.
But the statement stopped short of an outright bailout for a sector that's widely expected to shrink from its roughly one-quarter share of China's economy.
"Regarding property, they vowed to meet the reasonable financing needs from developers. It's noteworthy that the conference didn't mention the mantra 'housing is for living, not for speculation,'" Larry Hu, chief China economist at Macquarie, and a team said in a note published Tuesday.
"This time around, the focus is to keep regulatory pressure to prevent the emergence of new risks, instead of launching another de-risking campaign," the Macquarie analysts said.
They pointed out the words "regulation" and "risk" were mentioned fewer times in this year's readout, versus in 2017.
