Wednesday, September 23, 2015

Chinese Manufacturing had Worst Month Since 2009, Economy Likely to Grow "Only" 6.5 to 7% in 2015

Chinese manufacturing activity fell to its lowest in more than six years in the latest sign of the slowdown in the world's second biggest economy, according to a survey released Wednesday.

The latest data was worse than economists had expected and unsettled global financial markets. Uncertainty about the extent of China's slowdown has been on the radar of investors, particularly after the Federal Reserve mentioned China as one of its reasons for not raising interest rates last week.

The preliminary Caixin/Markit index, which is based on a survey of factory purchasing managers, fell to 47.0 in September from 47.3 in August. Numbers below 50 on the 100-point index indicate contraction.

It's the sixth straight monthly decline for the index, which is at its lowest since March 2009, when the world was gripped by the fallout from the global financial crisis. The preliminary index reading is based on 85 percent of survey respondents. The final figure, which is often revised, is due by Oct. 1.


President Xi Jinping is visiting the United States as leader of a China whose image of economic success has taken a beating.

Stock market turmoil and a surprise currency devaluation fueled fears of a Chinese slump with global repercussions. But even a weaker China still is on track to turn in some of the world's strongest growth this year. And some industries including retailing are expanding at double-digit rates.

China's 5-year-old slowdown is self-imposed as the ruling Communist Party tries to steer the world's second-largest economy to more self-sustaining growth based on domestic consumption. Steel and construction suffered as the party put the brakes on an investment boom, but as job creators they already have been supplanted by e-commerce, tourism and other service industries.

"Those touting China's sudden fragility are either exaggerating current problems or have entirely missed the slowdown of the past several years," said China Beige Book, a U.S. research firm, in a report this week. It said China's image might be "more thoroughly divorced from facts on the ground" than at any time since it began conducting surveys of the country's economy five years ago.

Xi started his U.S. visit Tuesday with a stop in Seattle to meet business leaders and visit Boeing Co. and Microsoft Corp. On Thursday, he goes to Washington to meet President Barack Obama.

This year, Beijing is expected to report growth of 6.5 percent to 7 percent. That is down from last year's 7.3 percent but more than double the 3.1 percent forecast for the U.S. by the International Monetary Fund. Only India is expected to grow faster at 7.5 percent.


Krugman thinks China's economy is in trouble, but not overly concerned about contagion.

No comments: