Posted on 01/02/2009 6:30:24 PM PST by bruinbirdman
China’s vast manufacturing sector, the driving force behind the country’s celebrated economic growth story, is on the brink of technical recession as order books run dry and once humming factories fall silent.
The bleak snapshot of business conditions, which may herald yet more shrinkage in China’s growth prospects this year, arrived yesterday via the manufacturing purchasing managers’ index (PMI), a survey produced by CLSA, the Hong Kong brokerage.
Widely scrutinised by markets, the monthly report is considered by many investors to be one of the most useful leading indicators for the Chinese economy. Over the past 12 weeks it has painted a far more rapidly worsening picture than anyone predicted and now highlights China’s unexpectedly high vulnerability to the global financial crisis.
Eric Fishwick, CLSA’s chief economist, who compiled the PMI report, said that China’s manufacturing activity was very weak last month. “Output contracted at a record pace, employment fell for the fifth month and work in hand declined.” he said. “With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43 per cent of the Chinese economy, is close to technical recession.”
Although the main PMI index rose slightly in December from its record low in November, the reading of 41.2 means that the CLSA index remains far below the levels once considered normal. A reading below 50 means conditions are worsening: the accompanying manufacturing output index plunged to 38.6, marking the sharpest drop since the survey began. The Chinese Government’s own PMI for December is due to be published tomorrow, and analysts believe that it is likely to show similar pessimism throughout the manufacturing sector.
The worsening meltdown spells yet more misery for Beijing as the Government battles to restore stable growth. Many believe that the Communist Party’s political legitimacy depends heavily on its ability to
(Excerpt) Read more at business.timesonline.co.uk ...
You're pretty darned smart. Watch for China to become much more bellicose in the very near future. The ChiComs promised their people prosperity in return for chains.
The prosperity they've had is about to come to a screeching halt. They'll need an enemy to blame it on. Couple that with the fact that there are something like 100 million unmarried 20 something males in China and you've got the makings of a nice little war; most likely with India.
Maybe Taiwan, but most likely India.
L
I hear the ChiComs make some potent baby food.
yitbos
I imagine that once we stop being useful to one another, things should start getting...interesting.
Seems to me it was the Great Stainmaker who granted China most favored nation status, while at the same time giving them advanced missile technology thru Lorel (sp?). I've always felt that it'll be decades before we realize the long term damage that was done during the Clinton administration.
Really?
Suddenly, even the Euros are figuring it out. Uh oh, they've been rooting for our demise so long they didn't realize what our demise would mean.
Not to mention the American companies that chose to exploit the cheap labor and bigger profits. Being a good conservative, I say, do what you want with your company and reap what you sow.
It’s about time for a war.
I agree. I stopped blaming China for being China a long time ago. I blame the companies and importers here for the mess they’ve made.
The Red Army might be needed to maintain domestic tranquility.
yitbos
Manufacturing costs were going up, and the Chinese have begun placing mandates on employers for benefits for employees. I’m hearing these factories are closing and the land being turned back into farms.
The prosperity they've had is about to come to a screeching halt. They'll need an enemy to blame it on. Couple that with the fact that there are something like 100 million unmarried 20 something males in China and you've got the makings of a nice little war; most likely with India.
You have vocalized my major fear, which is that China's economic downturn is going to create civil unrest in China that will result in either civil war (a better option for the US) or war with a neighbor.
While ultimately, India is the real competition, India has historic ties to Russia and the Chinese will not want a two-front war. China has a Muslim problem and would speculate that Pakistan or the historic enemy, Japan will be the real tempting targets of a Chinese government loosing its grip on the populace.
Good point. I guess they can't eat all those new aircraft carriers and submarines, can they?
They have been such a great friend. I will miss that.
Not unless they have super-human metal chewing powers... Sounds like they'll need someone to fight. I'm hopeful it's not a certain country that owes them a $585 billion (http://en.wikipedia.org/wiki/United_States_public_debt).
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