Keeping an Eye on China's U.S. Investments, Manufacturing

Meanwhile, back on the mainland, China has undertaken an aggressive strategy of building up manufacturing capacity while purchasing refined base metals for stockpile. In the short term, this activity has provided support for some metal and mining interests. However, spot prices for scrap base metals have begun to decline recently, indicating that excess supply has begun to overrun optimism. If China is forced to cut prices for finished goods in an effort to artificially ramp up production, the end result spells almost certain misery for manufacturers around the globe. That misery could be swift and certain unless consumers almost immediately tighten the slack through increased purchasing.

Be on the lookout for China to possibly begin manufacturing surplus goods ahead of consumer demand increases. If this happens, one of two scenarios shall most likely be initiated. Increased production volume could become a well-timed precursor to increased consumer demand, signaling a further step away from a stagnant world economy. Otherwise, newly produced surpluses could again build up inventories of unsold goods, causing possible deflation at the wholesale level and leading to another round of belt tightening by manufacturers.