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China Contracts

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Spending just $3.33 on US-produced goods every year by every person in the USA would create 10,000 jobs. We obviously don’t have that much money to spend or we don’t care. Or, we don’t produce it in the USA these days. Spending that little amount of money would be easy. But, why don’t we do it? Instead we worry over the fact that China might be doing this or cutting that. We ponder the effects of the Purchasing Manager’s Index and the Gross Domestic Product of another country rather than looking at our own labor market.

The USA doesn’t produce all of its own flags (the US imports $3.2-million worth of them from China). There are no televisions that are manufactured in the USA (since 2004 when Five Rivers Electronic Innovations went bust). Levi’s Jeans are manufactured (except for one single line of jeans) outside of the USA. Even the USA’s 2012 Olympic uniforms were made in China.

According to a survey carried out in the USA a few years ago about American sentiment regarding Made in the USA, respondents stated that 99% of them would buy American if they could and 42% said they would do so even if it were more expensive!

So, what do we do? We rely on other countries because we can’t purchase what we want at home. That means every time China starts moving up or down, we in the USA get the jitters and see our investments disappearing.

China contracted in the first quarter of 2014 according to data that is released today from a preliminary Purchasing Managers’ Index survey by Markit/HSBC. Although it is not the official PMI released by China onApril 1st, it provides a good gauge that China is not doing as well as they/we might like. The Markit/HSBC PMI takes into consideration private companies that are smaller than those that are in the official PMI for China.

The Markit/HSBC figure stands at 48.1 for March and that’s an all-time low for the past eight months.February’s figure was 48.5, which means that the Chinese are well below the level of 50 and they have been ever since the start of this year.

The world has been questioning the economic activity of China for over a year now and it seems that these concerns will be reinforced when the official figures are released. China is indeed slowing down. It can be expected that China too will now take the long road of stimulus to boost its economy. This may include:

• Lowering entry barriers for private investment.
• Spending to target public housing
• Spending on air-pollution
• Loosening monetary policy so that the economy will continue to grow at 7.5%.
• Reducing lending rates.

Already last year the Chinese economy officially grew by 7.7%, which is the same figure as for 2012. Deceleration is suspected to continue well into the second quarter of this year.

The Vice Finance Minister Zhu Guangyao stated in an interview that they would not be making the same mistakes as in the past by over-stimulating the Chinese economy.

However, the Finance Minister Lou Jiwei stated that it was the labor market that was more important than the economy and reaching healthy levels for workers was essential, even more so than getting 7.5% in economic growth. If Beijing wishes to improve consumption in the country, then the question is whether or not they will be willing to forego economic growth in the meantime while they bring that about. Secondly, how much will they be prepared to sacrifice? The Chinese economy is slowing down and some believe it will weaken even more so in the coming months. Growth is expected to fall to about 7% in 2015 and 2016.

Economists believe that this contracting is the sign of last summer’s interbank rate soaring to over 10% amid concerns that there was a credit squeeze and a shortage of liquidity in Chinese banks.

It would seem that it’s domestic demand that is proving to be the problem at the moment for China. March is expected to see a rebounding PMI in normal times, because the Chinese New Year is over and there should be a return to orders and activity. However, this is not the case. Output and new orders have been weakened according to the figures; although new exports grew.

Who will benefit from China’s contracting? Some now believe that just because China will be slowing down it doesn’t mean that the world is going to nose-dive into chaos and economic slump. The world may actually benefit from balanced growth (although commodities will certainly come in for a rough ride). But, isn’t it the Chinese state that has engineered their own economic slow-down? So, in theory if it fell too much, they would be in a position to counter-act that; or at least control means avoiding a crash-landing. If they tripped up, however, they would make the rest of us fall too. The commodity-based economies would have a knock-on effect on the rest of the world. However, it might also open up new opportunities.

If only China could get contracts rather than contracting. If only the USA had more home-made products that would mean the Americans could comfortably buy from home rather than importing and worrying about Chinese PMI.

If only pigs could fly…

Originally posted: China Contracts

 

 

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Tue, 03/25/2014 - 18:16 | 4591939 yellowsub
yellowsub's picture

So how many jobs did $4T created?

Tue, 03/25/2014 - 17:31 | 4591806 moneybots
moneybots's picture

"Spending just $3.33 on US-produced goods every year by every person in the USA would create 10,000 jobs."

 

Nice in theory.  Computers, smart phones and tablets are not made in the U.S.

Maybe some day they will be, by robots.

Tue, 03/25/2014 - 16:29 | 4591589 Fíréan
Fíréan's picture

If spending $3.33 every year by every American would created 10,000, then by that same maths it will take "every Amercian"  to spend  $3,330.00 per year to create 10,000,000 jobs and cut the national (official) umemployment.  I wouldn't doubt, correct me if I'm wrong,  that the largest percentage of the collective  "every American" doesn't have that extra floating around and it's not that they don't care, yet they would if they could afford to do so.

Tue, 03/25/2014 - 16:37 | 4591609 sgt_doom
sgt_doom's picture

This clown writing this blog post cites Markit/HSBC --- Markit being founded by JPMorgan Chase, Goldman Sachs, Bank of America and Citigroup to artificially price credit derivatives (THEIR derivatives) and HSBC is a major drug money launderer and crime organization!

Next, I (and many of my fellow activists) have been fighting jobs offshoring since 1980 or before --- and people (dishonest idiots) still want to argue about its efficacy?

The Ameritards gush when Chelsea Clinton gets a job at McKinsey, which has been the major corporate promoter (and earned most of their fees from it) of jobs offshoring!  (Next Chelsea would go to a vulture capital firm, Avenue Capital -- or was that before McKinsey?)

It's toooooo late, doood!

It is 42 years or more tooooo late (addressed to the author of this blog)  --- there is no longer an economy in the USA, simply one Ponzi on top of others!

Who waa Obama's second appointment?  Diana Farrell, of McKinsey Global (not an economist, by the way) who earned all her big bucks by being America's NUMBER ONE evanglist for jobs offshoring --- she was the editor of OFFSHORING  --- now take a case what that book was about?

 

Tue, 03/25/2014 - 16:23 | 4591562 kurt
kurt's picture

I think it is time for a "Buy American" movement. The reason it may work: the american retail sector was destroyed by the petroleum sector when it absorbed the cash from the american consumer, one tank at a time. The recession started when gasoline went over $2.65 per gallon and will end when it drops below that again. 

What's left of the retail sector will resist "Buy American" so somebody is going to have to run it. Who?

Tue, 03/25/2014 - 16:40 | 4591618 sgt_doom
sgt_doom's picture

In case you weren't paying attention, and you sure sound like your head was up your skankhole, Kurt, the "Buy American" portion of the stimulus from the Obama Administration was watered down on two major fronts.  First, the Bretton Woods Committee lobbied congress to water it down, then the Obama Administration followed through by appointing future ambassador to China, Gary Locke, to be Secretary of Commerce to grant waivers to that clause in the stimulus!

http://www.economicpopulist.org/content/who-killed-federal-stimulus

 

Tue, 03/25/2014 - 16:51 | 4591672 kurt
kurt's picture

My skankhole smells of custard. I mailed you a some weepy bits. It should be just right for you after 3 days in a hot UPS truck, enjoy.

Tue, 03/25/2014 - 14:36 | 4591086 besnook
besnook's picture

the hooker i like was produced in the usa. does she count? maybe i should buy some american flag condoms for doing such a pro american thing.

Tue, 03/25/2014 - 14:11 | 4590974 eaglerock
eaglerock's picture

Once we outsource our capabilities of manufacturing something, it becomes forced trade, not free trade. 

Tue, 03/25/2014 - 11:38 | 4590182 Stuck on Zero
Stuck on Zero's picture

 We do not protect Americans from mercantilists.  We do not protect Americans from Wall Street. We do not protect Americans from public unions. We do not protect Americans from evil corporations.  But we spend a trillion $ a year for military "protection" of whatever is left.

 

 

Tue, 03/25/2014 - 17:39 | 4591819 ThroxxOfVron
ThroxxOfVron's picture

"We do not protect Americans from mercantilists.  We do not protect Americans from Wall Street. We do not protect Americans from public unions. We do not protect Americans from evil corporations.  But we spend a trillion $ a year for military "protection" of whatever is left."

Dear ZeroHedge Poster,

As long as several hundred billion dollars more get to Israel, Egypt, Afghanistan, Iraq, Ukraine, and wherever else corruption and ingnoranceand be bought to promote wars, drug trades, and other hidden corporrate and/or religious agenda; let the American Citizenry languish, rot and otherwise go to hell.

-signed,        

Barack Obama

United States Congress

US Supreme Court

Federal Reserve Bank

Tue, 03/25/2014 - 16:42 | 4591632 sgt_doom
sgt_doom's picture

Dood!

They have successfully protected us from the Klingons!

Have you or your neighbors yet been attacked by any Klingons?

I thought not . . .

Tue, 03/25/2014 - 10:27 | 4589890 elwind45
elwind45's picture

When China moves up and down we see our investments disappear? Thank you mia culpa

Tue, 03/25/2014 - 16:43 | 4591634 sgt_doom
sgt_doom's picture

Triffin's delimma makes no sense in an economic democracy, only in a plutocracy, but I wouldn't expect you to comprehend that!

Tue, 03/25/2014 - 08:46 | 4589486 Vitautas
Vitautas's picture

Yeah, fuck free markets. Close the borders for foreign goods. And introduce centrally planned economy.

Tue, 03/25/2014 - 16:45 | 4591647 sgt_doom
sgt_doom's picture

Which "free markets" are you referring to?

The rigged LIBOR rates markets?

The rigged forex markets?

The rigged interest rate derivatives markets?

The rigged precious metals markets?

The rigged ETF markets?

Please explain, you've got me perplexed!

Tue, 03/25/2014 - 11:42 | 4590189 Reference Variable
Reference Variable's picture

I had to log in just to junk you. You obviously aren't making a living in manufacturing.

I have a large overhead I have to pay for my business here in the US due to central regulation/taxation through EPA, OSHA, IRS,abiding by intellectual property & copyright law. I am crippled as a US manufacturer when competing with the Chinese who abide by nothing except PBOC bribes. There is no fair trade here. 'Fair trade' was a wholesale sellout of American manufacturing for the benefit of large US companies and banks that can offshore capital and resources. Everyone else got fucked.

Do you think we can really exist in a service economy? That is exactly what's happening as capital and manufacturing leaves this country and it will be our doom.

Tue, 03/25/2014 - 16:47 | 4591654 sgt_doom
sgt_doom's picture

You sorta just defined globalization:  when multinationals reduce wages of labor by offshoring jobs and importing foreign scab workers, then expand their markets globally as the local workers can no longer afford their products due to their reduced wages.

Tue, 03/25/2014 - 05:56 | 4589188 lasvegaspersona
lasvegaspersona's picture

Seriously

what would I buy?

I already have a Martin guitar, what else is there?

I also have Colt, S&W etc.

Tue, 03/25/2014 - 08:24 | 4589406 d edwards
d edwards's picture

I know, let's get the gov't jackboot off the neck of the domestic oil, coal and nat gas production. Our energy prices wouldn't "necessarily skyrocket" (qoute 0bamao) and there'd be a rebirth of industry in this country providing goods and services-oh yeah, and jobs.

Tue, 03/25/2014 - 16:49 | 4591661 sgt_doom
sgt_doom's picture

Exactly, d edwards, we need to do what Indiana did and privatize the water supply in each major city and state, so we can all have have brains dissolved by brain eating bacteria. (Which they are now dealing with in Indiana in their water supply!)

Tue, 03/25/2014 - 05:33 | 4589171 new game
new game's picture

texas makes stuff for the oil industry. upon my recent visit i learned top drive rigs(same version) are 120k cheaper for the china version. so which one do you think is on order? thanks unions for being market competitive and fucking over the very people you sought to help. now if we could drive them out of government and get a real wage so my fuckiing taxes were lower...if you work for a union-fuck you. right to work, like wisconsin did- governor walker; huh, don't hear about how they have turned around their finances, do you-thanks msm, the anti-thesis of life, fucken basterds=journalist...

plain and simple, this country is fucked from top to bottom. america is the bloated pig floating down the river; wake up; go for a 3500 mile drive, look, listen, talk, connect the dots and soon you will loose hope as I have...

Tue, 03/25/2014 - 16:28 | 4591584 kurt
kurt's picture

Hey Tex!

Place your lips around my Union Loving American Cocsickle and Suuuuck! "Steers and..." Asshole!

Tue, 03/25/2014 - 03:59 | 4589116 fukidontknow
fukidontknow's picture

Do they make stuff in the USA? Everything we have over here is made in Asia or Germany.

Tue, 03/25/2014 - 15:10 | 4591259 RevRex
RevRex's picture

You can thank a Union for that!

Tue, 03/25/2014 - 08:57 | 4589528 RafterManFMJ
RafterManFMJ's picture

We make the KB-35 Jet Fighter - it's got incredible range as it gets towed into combat by an old Massey Ferguson tractor. Plus, it evades radar by staying below tree top and shrub top level.

Tue, 03/25/2014 - 16:51 | 4591671 sgt_doom
sgt_doom's picture

And everytime it flies across the International Date Line, its engines power down?

Guess it is that superior Punjabi (as in India) programming brought to us by Lockheed Martin, the major sponsor (financier) of NCIS propaganda shows for really stooopid Ameritards!

Tue, 03/25/2014 - 16:43 | 4591636 kurt
kurt's picture

Yeah, sure. Later on your tribe can dance around the EMP blasted, out of fuel hulk. Nobody will even remember knowing anyone who could get it to go. It does make a nice centerpiece for a cargo cult.

Tue, 03/25/2014 - 03:33 | 4589010 Dr. Bonzo
Dr. Bonzo's picture

But, isn’t it the Chinese state that has engineered their own economic slow-down?

 Dude, you got this exactly backwards. Via a process of raw financial mercantilism the Chinese have elbowed their way to the top of the heap. They offered the world nothing in terms of value. Nothing. Instead, through the process of the printing press they have aggragated wealth. The fact that their development has not been gradual and even and not benefitted all Chinese essentially proves it. What do we have to show for China's rise to power? Basically, cheap Chinese labor has gutted our industrial capacity and surpressed prices for cheap consumer goods. Big fucking woopdidoo. Much of China is an industrial post apocalyptic wasteland courtesy of their helter skelter no-holds-barred single-minded pursuit of instant modernization.

Let's put it this way. Suuuuuuuure, the Chinese could get greedy and push this model to the brink of complete global collapse, in fact, there are knowledgeable pundits who are predicting this at any rate.

You can sheer a sheep so many times but skin it only once.

The Chinese have pushed the debt-leveraging printing game to the very end of its logical conclusion. They could push it further... until the whole thing burns down. They have no choice but to put the breaks on. Because they are medieval mandarins they think they can control the process. That's why they are putting the breaks on.

If Beijing wishes to improve consumption in the country, then the question is whether or not they will be willing to forego economic growth in the meantime while they bring that about.

Hong Kong gets about 140,000 Mainland shoppers. Per day. Every day. Nonstop. This is a city of 7 million. Those people don't spread out evenly over the city enjoying what it has to offer. They all cram the same trains, same busses, same streets, same shops. I had a realization... why the fuck do these goddamned people keep coming to Hong Kong to do their shopping? It's not just the leveraged currency differential.

There's essentially a lack of faith in domestic products. Even so-called brand name shit. Because everything in China is fake. Not just the GDP numbers. Every-fucking-thing. The whole country is a fiction written in cement and steel. It's a sham. Cardboard dumplings. iFones. Lious Vitom. Doctoral theses. You name it. They fake it.

How does this bare on the much-vaunted "market liberalization" and "stimulate domestic consumption" everyone keeps going on about.

Simple. It. Ain't. Gonna. Happen. What you are essentially witnessing in China is massive capital outflows. The only ones pouring money into China are retarded westerlings. The Chinese themselves know it's all fake and each and  every one of them buys foreign shit because they know everything within their borders is a fraud.

The only way for the economy to actually "liberalize" is for China to institute allllll those nasty reforms that they have no intention of implementing. Rule of Law to bolster consumer confidence. Freedom of expression to stimulate intellectual growth. Property Rights to stimulate domestic investment.

It. Ain't. Happening.

China will not change. It's just that simple. The current political system will have to collapse in order for change to come about.

The good news is... with a little bit of push... that miiiiiight just be possible.

 

Fingers crossed for all of us.

Tue, 03/25/2014 - 16:53 | 4591678 sgt_doom
sgt_doom's picture

I believe you left out China's great leap forward in forced organ harvesting.

https://www.dafoh.org/

 

Tue, 03/25/2014 - 01:45 | 4588996 GoldenDonuts
GoldenDonuts's picture

Perhaps the best thing that could possibly happen for working class americans is to lose the petro dollar and have to produce things for themselves again.  Things other than digital green backs.  Maybe being the reserve currency only helps the bankers?

Tue, 03/25/2014 - 09:48 | 4589706 Global Observer
Global Observer's picture

Nice idea, but won't happen. The US' ability to import stuff simply for generating currency will be lost, but it won't mean industrial production returning to the US. It will mean US becoming an energy exporter. Not because there is surplus energy at current consumption rates, but because the consumption rates will fall dramatically once the economy is compltely trashed with the collapse of the US$. Building industrial production capacity takes years and perhaps more than a decade. Investors with an outlook of more than 10 years are needed for it as well as manpower trained in the necessary skills. But the most important of all is the investors faith in the political stability and congenial climate for the long haul, something that will not be available in the aftermath of the US$ collapse.

Tue, 03/25/2014 - 16:54 | 4591683 sgt_doom
sgt_doom's picture

Than you very much, GO, for explaining it and saving me the trouble!

Tue, 03/25/2014 - 05:20 | 4589163 Pinche Caballero
Pinche Caballero's picture

"...about American sentiment regarding Made in the USA, respondents stated that 99% of them would buy American if they could and 42% said they would do so even if it were more expensive!"

I agree with you GoldenDonuts.

I am sometimes forced to buy SHIT products due to lack of consumer choice that I know are shitty and that I will have to re-work, reinforce, or reassemble, upon taking out of the packaging. That is why I enjoy purchasing guns. When I buy what I feel is a reasonably priced new firearm, I don't question the quality of its manufacture.

I would gladly pay more for QUALITY products, if I could find them. The quality will not return until the end of the petrodollar and the return of the local manufacturer who sees himself in the role of a craftsman.

As a laborer (one who enjoys working with his hands) I have over the years watched as inflation has driven up the $ price of tools, equipment, and material.

The costs of manufacturing these things in large quantities should be decreasing, or at least not substantially rising.

The quality of the tools,equipment, and material continues to be of less and less quality. The gauge metal gets less and less or becomes cheap plastic altogether, functions are no longer mechanical and instead everything is a circuit board operation. The assembly processes are shit, because everything is about extracting even greater profits for stockholders today than yesterday, and even more tomorrow than today. At what point do people finally realize nearly everything purchased should be considered a disposable item? As intended by the manufacturer...

I want to buy a tool, car, tractor, home appliance that I can reasonably expect to last ten, fifteen, or twenty years. That is not unreasonable, and things were that way in the not so distant past.

I would gladly choose to pay a bit more for a product produced locally by someone who takes pride in his work and in the item he manufactures.

Tue, 03/25/2014 - 14:41 | 4591118 GoldenDonuts
GoldenDonuts's picture

Hi Pinche  One thing that I would say is that there is a lot of really cheap empty factories doing nothing in the US.   Capital Equipment is expensive but you know the US still does make a lot of that stuff.  Plus they have energy products, Iron Ore, Steel Mills, etc etc.

Tue, 03/25/2014 - 16:56 | 4591687 sgt_doom
sgt_doom's picture

Hollywood has yet to make the Ballad of Aaron Feuerstein?

Tue, 03/25/2014 - 12:28 | 4590428 SubjectivObject
SubjectivObject's picture

I fully agree, support, and attempt to do the same thing: buy and pay for quality, and avoid China syndrome (looks great, but bad materials don't last) production whenever possible (and Craigslist for the good old stuff).  I think the rising cost of materials and tooling is probably due more to local currency degeneration than any dengeneration of producition efficiency.

Tue, 03/25/2014 - 00:08 | 4588847 honestann
honestann's picture

If only manipulation didn't exist.

Then I'd buy from whoever offers me the best value/price (including all costs like shipping).

And BTW, don't tell me I should favor anyone over anyone else.  Who do authors (and others) think they are to tell others how to make their own value judgements?

Mon, 03/24/2014 - 19:53 | 4587982 Raisuli
Raisuli's picture

Here in Ok, pigs fly in tornadoes. Sadly, the pig has little say in the matter. Sometimes, I feel like a pig in this global economy. What I want, I can not have. What I get, I do not want.

Tue, 03/25/2014 - 02:09 | 4589030 Ban KKiller
Ban KKiller's picture

Like those chinese floater pigs in the rivers of china. 

Tue, 03/25/2014 - 07:24 | 4589280 AmCockerSpaniel
AmCockerSpaniel's picture

"" The USA doesn’t produce all of its own flags (the US imports $3.2-million worth of them from China). There are no televisions that are manufactured in the USA (since 2004 when Five Rivers Electronic Innovations went bust). Levi’s Jeans are manufactured (except for one single line of jeans) outside of the USA. Even the USA’s 2012 Olympic uniforms were made in China. """ 

Free Trade ....... Americans just don't get it. They think it's what ever the government tells then it is!

Tue, 03/25/2014 - 08:52 | 4589508 RafterManFMJ
RafterManFMJ's picture

That free trade will pay off for the common man any decade now, just gotta gird those loins and be patient.

The Benifits of free trade are only 5 years away, and have been for 20 years.

Tue, 03/25/2014 - 16:58 | 4591691 sgt_doom
sgt_doom's picture

And what administrations were pushing that bullcrap?

The Reagan Administration, the Bush #1 Administration, the Clinton Administration, the Bush #2 Administration and the Obama Administration!

Tue, 03/25/2014 - 13:20 | 4590691 Matt
Matt's picture

The benefit is much lower prices. The trade-off is that you have to compete with global labour and safety/environmental standards.

Tue, 03/25/2014 - 14:02 | 4590930 Son of Loki
Son of Loki's picture

My neighbor keeps yapping , "Buy America!...Buy America!" then goes out and buys a Toyota and everything "Hecho en China, Japan, Cambodia, etc"

Tue, 03/25/2014 - 05:28 | 4589173 Pinche Caballero
Pinche Caballero's picture

Bridges over troubled waters? Sort of like stepping stones, a form of recycling. Lots of good in it when viewed that way. Hmmm...

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