IMF says China slows; Caixin China PMI col­lapses

Financial Mirror (Cyprus) - - FRONT PAGE - By Dou­glas McIntyre

In­ter­na­tional Mon­e­tary Fund (IMF) chief Chris­tine La­garde said what the eco­nomic world al­ready knows. The Chi­nese econ­omy is slow­ing and the slow­down will touch the rest of the world. Data from the care­fully fol­lowed Caixin re­search agency con­firmed this.

La­garde made her com­ments in In­done­sia in an ad­dress ti­tled “Poised for Take-Off — Un­leash­ing In­done­sia’s Eco­nomic Po­ten­tial,” in which her main fo­cus was the fu­ture of the lo­cal econ­omy. How­ever, part way through her speech, she said: “Other emerg­ing economies, in­clud­ing In­done­sia, need to be vig­i­lant to han­dle po­ten­tial spillovers from China’s slow­down and tight­en­ing of global fi­nan­cial con­di­tions.”

La­garde did not have to wait long to get more ev­i­dence.

The Caixin PMI In­dex re­lease said: “Chi­nese man­u­fac­tur­ers saw their op­er­at­ing con­di­tions de­te­ri­o­rate be­tween July and Au­gust at the fastest rate seen in more than six years, ac­cord­ing to the latest Caixin China Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex re­leased Tues­day.

“The Au­gust man­u­fac­tur­ing PMI of 47.3 rep­re­sented a slight in­crease from a pre­lim­i­nary flash read­ing of 47.1 posted ear­lier in the month. But it was down from 47.8 in July.

“Au­gust thus marked the sixth, suc­ces­sive month in which the in­dex came in be­low the 50-point mark, the di­vid­ing point be­tween busi­ness growth and con­trac­tion among the com­pa­nies sur­veyed.”

There are sev­eral well-ar­tic­u­lated rea­sons that the Chi­nese econ­omy has dropped to­ward what might be con­sid­ered a re­ces­sion, given such pow­er­ful ad­vances in gross do­mes­tic prod­uct for years. The first of these is that the cen­tral gov­ern­ment hid the cor­rect num­bers to make it ap­pear that China was still healthy. Another is that the cen­tral gov­ern­ment’s ef­forts to en­tice the pri­vate sec­tor to­ward be­ing self-sup­port­ing have failed. Another the­ory is that China’s cheap la­bor is not as at­trac­tive for man­u­fac­tur­ers as cheaper labour in places like Viet­nam and Mexico.

No mat­ter what the rea­son, the Chi­nese gov­ern­ment has started to scram­ble to sup­port its stock mar­ket and what seems to be a sharp dive in the for­tunes of its flag­ging pri­vate sec­tor. Un­less those ef­forts take hold soon, the IMF view is right.

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