China's reserve-building plan targets purchases of 1 million tonnes of aluminium, 400,000 tonnes of copper and 400,000 tonnes of lead and zinc together over three years, according to a report Friday on a Web site controlled by the China Nonferrous Metals Industry Association.

That's a significant amount of copper.

China has been a key contributor to the increase in copper demand and has stated that the country will continue to buy copper as part of its stockpiling program.

Moreover, Q1 2009 new Chinese bank loans more than tripled to a record 4.58 trillion Yuan. Their banks just lent 94% of what they did in all 2008!

This followed the removal of lending restrictions by the Chinese government which urged banks -- which are essentially a governmental conduit to fiscal policy -- to support its 4 trillion Yuan stimulus plan.

All the infrastructure spend should keep a fire under Chinese demand. Also March was an all time record for Chinese car sales. That too supports base metals.

None of this is to say that China won't try to time its sales to some degree to get the best possible price. If the price starts moving too high, they will back off until in drops back down. I see a range more around $1.75 up to about $2.25. At least until the rest of the world's economies recover.

Watch India as well. Growth there is still around 5% and their infrastructure need is great. And Tata's new Nano car -- priced at $2,000 dollars -- should have strong sales.

There is a reason China has not stopped accumulating this metal. They believe it is trading at a significant discount and their economy is continuing to expand significantly. As importantly, it is an important diversification out of the US dollar.

Many thought countries like China would move significantly into gold.

So far, the 'precious' metal has been copper.