Rio Tinto boss hopes for China recovery in 2009

Tom Albanese, the chief executive of Rio Tinto, said today that he expects the Chinese economy to rebound in the second half of next year. Mr Albanese said that China's financial wealth should enable its Government to stimulate the economy in 2009 after a dramatic downturn in manufacturing activity and economic growth in recent months. Rio boss of Rio was briefing investors on the company's proposals to reduce debt and capital expenditure today and he attempted to sound both optimistic and cautious about China's prospects. Mr Albanese said that, although Rio expected demand for raw materials to rebound in the second half of 2009, the Anglo-Australian miner would position itself to cope with any economic situation in China. Rio announced today that it will cut its workforce by 14,000, reduce spending by $5 billion and halt expansion projects at mines around the world in response to a downturn in the commodities sector. Mr Albanese told The Times: "The fourth quarter of this year has been far worse than anyone expected in China and we are unlikely to see an improvement in the first quarter of next year. We expect next year to be a tale of two halves. A lot of stimulus is going into the Chinese economy and we expect that to manifest itself in recovery in the second half." The Chinese economy has driven demand for commodities during the past five years as its booming manufacturing and construction industry sought access to raw materials, such as iron ore, copper and aluminium. This has led to a boom in prices for these metals but, as the Chinese economy has slowed, their cost has collapsed. This has been exacerbated by the Chinese Government reducing warehouse stocks of these metals. Despite Mr Albanese's belief that China will recover, he has clearly been under pressure from more pessimistic investors and he stressed that Rio was also making plans to cope with a longer period of reduced economic growth in Asia. He said: "We are having to ask ourselves, what if the situation is not that good? Our review recognises that most of our metals and minerals are going through an unprecedented decline in pricing and demand." Source: Times Online