An interesting thesis, demand for China is central:

From Bloomberg:

• Commodities demand from China, the world’s largest metals consumer, will rebound in the next quarter and investors should buy some mining stocks, Goldman Sachs JBWere Pty said.
• Investors have more than priced in a “worst-case” scenario in China’s economic growth to just 8 percent in the recent stocks sell-off, analyst Malcolm Southwood said. Buying now would be “rewarding,” he said, without naming stocks.
• China’s economic growth has slowed for four quarters as exports cooled, and concerns about slowing commodity demand sparked a 10 percent decline in the Reuters/Jefferies CRB Index in July. Demand from China, the world’s fastest growing major economy, has spurred six years of price gains for commodities.
• “We believe that the key structural themes behind the commodities and resources boom of the past five years are very much intact,” Southwood said in a report yesterday. “We believe that 8% GDP growth would still generate high single- digit demand growth for key commodities.”
• Supply of coal, oil and copper will struggle to meet demand in the next 12 months, Goldman said. Southwood recommends buying diversified mining companies, which have “become very inexpensive.”
• BHP Billiton Ltd., the world’s largest mining company, has fallen 18 percent in Sydney trading since July 1. Rio Tinto Group, the second-largest producer, dropped 19 percent in the same period. Copper on the London Metal Exchange has slumped 16 percent and oil is down 23 percent from its July 11 peak of $147.2 7 a barrel.
• The MSCI World Materials Index has dropped 17 percent since July as a worsening global growth outlook and prospects for increased supplies sent commodity prices tumbling. The Bloomberg World Mining Index dropped 25 percent.
• There may be a “strong rebound” in commodity prices and resource stocks from the fourth quarter as metals prices fall to a level where China has traditionally re-stocked, Citigroup Inc. analysts also said in a report dated yesterday.
• “The underlying driver of commodity intensive infrastructure investment in developing countries remains unchanged,” Citigroup analysts led by Sydney-based Clarke Wilkins said. “As the northern hemisphere awakes from its summer slumber and any real/perceived China Olympics-related weakness unwinds, we expect the stocks to rally in the fourth quarter.”
• China’s inflation cooled to the slowest pace in 10 months in July, the statistics bureau said Aug. 12. That may give the government room to restrain the yuan’s advance and bolster growth, economists have said.
• Retail sales expanded at the fast pace since 1999 in July, the bureau said today. Foreign direct investment in the country jumped 44.5 percent in the first seven months of the year, the Ministry of Commerce said yesterday.
• “Exports are still growing,” Goldman said. “Even in the troubled manufacturing sector there is little in the data to suggest that overall growth in consumption of raw materials is slowing severely. We can see little in the data to worry us that demand for raw materials in China is collapsing.”

And in fact, Chinese exports rebounded last month:

• China’s trade surplus swelled in July to its highest level in eight months as its trade gaps with the United States and Europe grew despite concern about weaker global demand, according to data reported Monday. Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.
• Export growth rebounded in July, the customs agency said, after a June slowdown prompted Beijing to boost tax rebates for struggling textile exporters.

Can it last though? That’s the question:

• “Though we expect a continued deterioration as the year goes on, as American and European consumers stay at home, the resilience of demand for China’s exports is still remarkable,” said Standard Chartered economist Stephen Green in a report to clients.

Only time will tell. But Goldman is right, even if China continues to slow down, 8% growth is still good enough for growing demand in commodities to continue at a brisk pace.

Is it time to buy Chinese shares. We agree with the following article that a bottom must be near:

Six Reasons To Buy China Soon

Inflation remains the biggest threat though, especially if that commodities boom resumes..