Rio Tinto (NYSE:RIO) Shrugs Off China's Higher Interest Rate Announcement

The announcement from the Deputy Governor of the People’s Bank of China that they'll probably raise interest rates soon in order to continue their battle against rising inflation didn't have much impact on Rio Tinto (NYSE:RIO), which announced they're going to continue to expand spending through 2011 to $11 billion, close to three times what they're spending in 2010.

The story of China is sometimes misunderstood or overreacted to, as even though they may cut back on spending and tighten their spending, it's a matter of degree, and they're still going to grow strongly, although probably not at the pace they have been.

Demand for some raw materials may fall, but China also likes to stockpile as well, so it's hard to tell the depth of the decline in imports they make in relationship to commodities.

Rio knows that China will continue to buy over time, and whatever steps they take in the short term does nothing to change the demand for commodities over the long term which is far from being exhausted.

Rio Tinto CEO Tom Albanese sees there being more volatility in the short to mid-term. He said, “The long-term picture remains very positive for our businesses, but there remain a number of risks in the mid-to- near term, and for us this points to continued volatility.”

Of the approximate $11 billion budget projected for 2011, about 40 percent of that will be set aside for the iron ore sector.