“Expanding domestic demand, particularly consumer demand, which is essential to ensuring China's long-term, steady and robust economic development, is the focus of our economic work this year,” Mr Wen said.

That marked a distinct shift in emphasis from last year, when Mr Wen said curbing persistently high inflation was the key economic policy for 2011.

After peaking at an annual rate of 6.5 per cent in July last year, inflation has since moderated and is no longer the main worry for Chinese policymakers.

Instead, reducing the country's reliance on exports and high levels of investment is seen as the key to maintaining the very high growth rates China become accustomed to over the past three decades.

Eoin Treacy's view China reached a juncture within the last few years when it became clear that it would gain more benefit from promoting the welfare of its citizens than investing in infrastructure. Here is a link to an illuminating report from the IMF dated January 2010. This evolution is beginning to be reflected in policy. Investment is increasingly being channelled into healthcare provision and coverage expansion. The gradual opening up of the urban social safety net to migrant workers is a more recent development. The provision of low cost housing is a factor which has come into sharper focus over the last two years as prices remained high and the government had to be seen to do something. A recent focus on improving China's environmental record is also a factor in this change of stance. Education is another focus of additional investment.

While in Australia last year an old friend, professor Max Stevens at the University of Melbourne, who has spent time teaching the education of mathematics at universities in China, described how much of a focus they were putting on primary years education. He said that he had seen whole university departments devoted to nothing other than improving the standard of mathematics textbooks for young children. He shared the example of children as young as five were being taught how to treat mathematics as a language. They were shown a picture of a panda holding three fruit next to a pile of five similar fruit and asked to write a mathematical sentence describing the image. 5+3 = 8 or 8-3 = 5. Using the child's answer they were able to identify those for whom algebra came naturally and which may need additional help. I remember from own school days in Ireland not encountering the idea of maths as a language until I was considerably older. One might argue how well young children are able to deal with such concepts but this example at a minimum suggests a focus on the education necessary to move up the value chain in terms of manufacturing and the wider economy.

China is not about to abandon the low end manufacturing sector or infrastructure development. However its migration from an investment led development to a consumer led economy is likely to have broad repercussions. This image from a report by Sarasin in 2010 highlights how difficult it is to sustain a high growth rate as GDP per capita increases. A focus on the consumer economy can be expected to be pursued for the foreseeable future.

Some of the largest beneficiaries of Chinese infrastructure development have been industrial resources exporters. Two trends have supported this demand led bull market: higher overall consumption and higher per capita consumption. China is likely to remain a major infrastructure builder, though perhaps not at the same rate of development as seen over the last decade. However, as living standards improve, per capita consumption of resources should continue to rise. Chinese demand will not evaporate but demand growth could slow.

Using 2010 data, the World Coal Association cites China as the largest producer of steel at 627Mt, the largest consumer of steel at 576Mt but the 5 th largest per capita consumer. India only consumed 52kg per capita versus 427 kg by China in 2010. Page 17 of this report from Rio Tinto highlights Chinese copper consumption growth and projected consumption as GDP per capita increases. It also highlights the potential for India to become a major consumer.

As China becomes increasingly more developed, India is more likely to become a future demand driver for commodity consumption. The industrialisation of much of ASEAN, the Middle East and Africa is also a potent source of demand growth for industrial commodities. More often than not, major bull markets end because supply increases to overcome demand rather than demand disappearing. Supply of industrial resources has increased over the last decade and significant investment is planned by the major miners. The probability is that new sources of demand growth will emerge but supply growth is still probably a more important factor than demand growth to monitor over the medium to long term.

In the short term, shares such as BHP Billiton and Rio Tinto extended their pullbacks today and have fallen back below their respective 200-day MAs. Sustained moves above 2100p and 3750p respectively would be required to check potential for a further test of underlying trading.

As the cost base of low end manufacturing rises in China, businesses are moving inland, innovating or relocating overseas. The Chinese interior has been a beneficiary of this migration since it offers somewhat lower wages. Indonesia, Vietnam, Philippines, India and even parts of Africa have also benefitted from this theme. If these countries wish to attract a greater share of this manufacturing migration they will need to build the infrastructure necessary to host it.

The consumer sector, led by the Autonomies, is ideally placed to benefit from the emergence of a burgeoning middle class. Currently a number of such companies are somewhat overbought relative to the 200-day MA so the risk of a reversion has increased. Sustained moves below that trend mean would be required to question medium-term uptrend consistency. (Also see Comment of the Day on December 9th for a list of Autonomies)