It was reported earlier today that Shanghai rebar prices were at a new interim low.

In terms of basic building materials, it doesn’t get much more basic than rebar (steel reinforcing bars placed into concrete to add strength).

Some analysts are beginning to use rebar prices in China to gauge the true level of development (since government numbers are hard to trust). Looking at the chart above, the recent trend in rebar prices does not look that promising, indicating that it may be a challenge for the Chinese economy to hit the 7.5% target set by the Party. Now, government officials may still resort to the old habit of severely fudging numbers (which was common in the Great Leap Forward) to please the “higher-ups” and make it look like the overall target is being achieved. However, as investors, we should take that into account.

Our recommendation for the last five years has been to avoid Chinese stocks. And, that’s still our recommendation.

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Richardson GMP Limited, Member Canadian Investor Protection Fund.

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