Assessing the Impact of Potential Chinese Fiscal Stimulus on Global Commodity Markets

In 2025, China's economic strategy has pivoted toward structural reforms and innovation-driven growth, diverging from the aggressive fiscal stimulus of past decades. While infrastructure investment and new energy projects remain central to its policy toolkit, the government's cautious approach to large-scale interventions has created a nuanced landscape for global commodity markets. This article examines how China's targeted fiscal measures—focusing on infrastructure, electrification, and consumption—are shaping demand for key commodities, and how strategic asset allocators can navigate these dynamics amid a slowdown-prone global economy.

Fiscal Stimulus and Commodity Demand: A Dual-Track Approach

China's 2025 fiscal stimulus emphasizes infrastructure and high-tech industrial development, with local government bond issuance reaching RMB 2.6 trillion ($361.70 billion) by July 2025—80% of the annual target—directed toward municipal construction, industrial parks, and transportationChina's Economy in H1 2025: Resilience Amidst Uncertainty^[1]. This infrastructure push is expected to drive demand for metals like copper and aluminum. For instance, copper consumption has surged due to grid modernization and electric vehicle (EV) adoption, with refined copper production projected to grow 7.5–12% in 2025, accounting for 57% of global outputChina's copper production in 2025 is set to reach a record high despite shortages of feedstock^[2]. Similarly, aluminum demand is bolstered by renewable energy projects, including offshore wind farms and solar power installations, which added 198 GW of capacity in early 2025China's modest stimulus is no big bang for commodities^[3].

However, traditional commodities face headwinds. Crude steel output is being curtailed to address overcapacity, while oil demand growth has slowed to 180,000 barrels per day in 2024, dampened by EV adoption and high-speed rail expansionChina's Slowing Oil Demand Growth Is Likely to Persist and Could Impact Markets^[4]. These shifts reflect China's broader pivot toward green energy and technological modernization, which prioritize long-term sustainability over short-term growth.

Global Slowdown and Trade Tensions: Moderating Factors

The global economic slowdown, coupled with U.S.-China trade tensions, is tempering the impact of China's stimulus. Reuters reports that China's GDP growth is projected to decelerate to 4.5% in Q3 2025 and 4.0% in Q4, raising pressure on policymakers to balance stimulus with structural reformsChina's GDP growth set to slow, raising pressure on policymakers^[5]. While the U.S.-China tariff pause has temporarily improved growth forecasts to 4.8% for 2025How will the US-China tariff deal impact China's growth^[6], unresolved trade disputes and potential tariffs threaten to disrupt commodity flows. For example, copper prices have fluctuated amid U.S. tariff threats, as Chinese producers shift supply chains to Southeast Asia to bypass trade barriersCopper prices are impacted by China's demand and trade tensions^[7].

Developing countries reliant on Chinese commodity demand—such as Mozambique, which exports coal and timber—are also feeling the strain. Weaker demand for traditional resources has constrained export revenues, though opportunities in liquefied natural gas and graphite align with China's strategic interestsChina's Economic Slowdown: What It Means for Mozambique^[8]. This duality underscores the need for diversification in trade and investment partnerships.

Strategic Asset Allocation: Sector and Regional Opportunities

For investors, China's fiscal stimulus and global slowdown necessitate a selective, sector-specific approach. Key opportunities include:
1. Copper and Aluminum: These metals remain critical to China's electrification agenda. JPMorgan Research highlights that EVs require 3–4 times more copper than traditional vehicles, making the sector a long-term growth driverInside China's Pivot: Smarter Growth, Sharper Investing^[9]. However, volatility from trade tensions and supply-side adjustments (e.g., delayed copper export bans) warrant cautionImpact of China's Stimulus Announcement on Commodity Markets^[10].
2. High-Tech and Green Energy: China's $50 billion AI investment in 2025China Unveils New Stimulus Package to Boost Economy^[11] and renewable energy projects signal resilience in innovation-driven sectors. Companies with strong capital discipline in automation and clean energy infrastructure are well-positioned.
3. Regional Diversification: Emerging markets with strong ties to China—such as Korea, Malaysia, and Australia—are sensitive to its policy direction. Conversely, India and Mexico offer alternative growth avenues due to favorable demographics and trade reformsAPAC Market Outlook 2025: Global Influences, Regional Opportunities^[12].

Conclusion: Balancing Stimulus and Structural Realities

China's 2025 fiscal stimulus is a double-edged sword for global commodity markets. While infrastructure and electrification projects sustain demand for metals like copper and aluminum, structural challenges—such as weak consumption and property market woes—limit broader spillovers. Strategic asset allocators must prioritize sectors aligned with China's innovation and green energy goals while hedging against trade uncertainties. As the global economy navigates a slowdown, diversification into high-quality, technology-driven assets and emerging markets less reliant on Chinese demand will be critical.