China’s demand for oil and minerals will continue to drive up commodity prices for years to come and be a key factor in global demand for Canadian resources and the dollar’s continued strength, suggests a Bank of Canada report published Thursday.

The paper in the bank’s fall review says China’s economy has been expanding by an annual average of 9.7% for the past quarter-century and there appears to be no end in sight.

But it was after China joined the World Trade Organization in 2001 that the economy of the world’s most populous country began to assert itself on the world stage, with both positive and negative consequences.

“In terms of commodity imports, China’s economic and trade developments appear to have grown much faster than expected, causing a larger-than-anticipated increase in global demand for oil and metals,” the report says.

“Together, these two effects help to explain the recent change in the relative prices of these goods.”

The bank report equates the China effect to that of the emerging economy of Japan in the 1960s, adding that international bodies have consistently underestimated China’s impact.

For instance, few foresaw that China’s demand for oil would grow by as much as it has — 28% just from 2002 to 2004 — contributing to the steep rise in crude oil prices to near US$100 a barrel level today.

As well, in 2002 China accounted for about 13% of world trade in metal ores. Three years later, that slice of the pie had grown to 25%, with estimates it may have exceeded 30% in 2006.

As a result, between 2001 and 2006, prices for metals such as aluminum, copper, nickel and steel have almost tripled.

But the paper notes that China’s impact on global inflation has not been all negative. Its emergence as an exporting superpower has kept costs of many consumer items, such as clothing, down.

“At this point, definitive empirical evidence that China is a net source of disinflation, or inflation, remains elusive,” the paper concludes.