Further Signs Of Economic Contraction In China

A new report released this morning shows slowing in China’s manufacturing sector:

HONG KONG — China’s manufacturing sector contracted in July at the quickest pace since last summer, according to the early reading of a survey released on Wednesday.

The survey came in at an 11-month low of 47.7 points for July, down from the final June figure of 48.2. A result below the 50-point level signals contraction.

The monthly survey of purchasing managers in the manufacturing sector, compiled by the research firm Markit and released by the British bank HSBC, offers one of the earliest glimpses at how the economy is doing each month and is closely watched by economists and investors. Final figures for July, based on more complete survey results, are scheduled to be released next week, alongside the results of an official manufacturing survey to be published the National Bureau of Statistics.

The so-called flash P.M.I. data provided the latest sign of the pressures faced by China as a whole as the authorities in Beijing try to raise productivity, living standards and domestic demand while shifting the economy away from its reliance on exports and investment.

The new P.M.I. data “suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking,” Qu Hongbin, the chief China economist at HSBC, said Wednesday in a statement accompanying the survey results. The July figure puts pressure on the labor market and “reinforces the need to introduce additional fine-tuning measures to stabilize growth.”

The efforts by President Xi Jinping and Prime Minister Li Keqiang, who took office in March, to rebalance the economy involve a delicate attempt to rein in the inefficient investments and surging lending of the past few years — but to do so without snuffing out the growth that is needed to create jobs, and maintain social and financial stability.

As has been noted before, the open question here is whether the Chinese government can manage this transition without pushing the economy over the brink, which would likely lead to the kind of social chaos that the government is quite obviously hoping to avoid. As history has shown us, economies are notoriously difficult to manage, and this is doubly true of one as massive as China’s.

FILED UNDER: Asia, Economics and Business, Quick Takes,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. BigEd says:

    China will have no problem whatsoever reigniting its economy should growth truly turn negative. It can start devaluing its currency again. It worked very well for them for almost 30 years; that is 30 years of 8% to 11% annual growth rates.

    The rest of the world has much to learn from the economic policies of the “communist” Chinese.

  2. JohnMcC says:

    OOPS! Linked this article to Dr Schuler’s post yesterday on a similar topic. The trials of the Chinese economy are getting to be pretty hard to ignore.

  3. JohnMcC says: