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Could this move by China put a rocket under ASX mining shares?

ASX mining shares may soon get another boost based on a potential move by China.

There are a number of ASX shares that sell a large amount of their resource production to China, including BHP Group Ltd (ASX: BHP), Fortescue Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO). Any increased demand from the Asian superpower could be good news for those businesses.

ASX iron miners have been benefiting from a rising iron ore price. Is more on the way?

What is China planning to do next?

According to reporting by Bloomberg, Chinese officials have said they could decrease the amount of money banks must keep aside as reserves so that they can boost their lending.

This comes after the central bank provided a large amount of liquidity through other tools in the last couple of months. Perhaps it’s not a surprise that ASX mining shares have risen over the past two months.

State-run Xinhua News Agency reported Zou Lan, the head of the People’s Bank of China’s monetary policy department, said the bank may use open market operations, medium-term lending facilities and reserve requirements among other monetary policy tools to provide strong support for reasonable growth in credit, according to Bloomberg.

Zou also reportedly said that the central bank will strengthen its counter-cyclical and cross-cycle policy adjustments to create “favourable financial conditions for the country’s economic growth”.

Bloomberg reported that Zou made similar public comments in July before the central bank cut the so-called reserve requirement ratio in September.

My thoughts on ASX mining shares

I’m certainly not an expert on the Chinese economy, but I’d guess most decision-makers in the country would prefer the economy to be stronger than it is today.

If more funding leads to more demand, it could mean higher commodity prices and this could be good news for BHP shares, Fortescue shares and so on. It’ll be interesting to see if a stronger China means more demand for copper, lithium and so on.

I don’t think this is the right time to invest in iron ore miners, but the signs are pointing towards helpful support for commodity prices in 2024. But, it could be better to wait for a weak iron ore price to invest in ASX iron miners.

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At the time of publishing, Jaz owns shares of Fortescue.
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