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China's Manufacturing Misses; Nonmanufacturing Worst Since 2008 Despite Unprecedented $1 Trillion "Debt Injection"
The most anticipated economic release over the weekend was the early glimpse into China's manufacturing and non-manufacturing sectors via the two key PMI surveys released by China's National Bureau of Statistics, to get a sense if the slowdown across China is stabilizing or, as some have suggested, rebounding. It did not: overnight the NBS reported that the manufacturing PMI remained unchanged in October at 49.8 missing consensus estimates of a modest rebound to 50.0, its third consecutive month in contraction territory.
As for the non-Mfg PMI a barometer of services and construction, while still in expansion territory (now that China is officially attempting to transition to a service economy), it fell to 53.1 from 53.4 in September, the weakest since December 2008.
Despite the clearly disappointing data, the spin was immediate: "The manufacturing sector is still contracting, though stabilizing," and the report indicates economic momentum remains sluggish, Liu Ligang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong told Bloomberg. "We still believe the Chinese economy will experience modest rebound supported by faster infrastructure investment in November and December."
A more accurate take would be to say that China's continued monetary easing hasn’t yet boosted smaller businesses as much as their larger, state-owned counterparts, which are able to borrow at reduced rates. Perhaps it won't: after all across the Developed World, ongoing QE, ZIRP and NIRP have now reached their point of diminishing returns (something even Mario Draghi admitted), so it just may be the case that ongoing easing by China will merely accelerate the exporting of deflation (and perpetuating the domestic misallocation of capital) in a world where currency wars are all the rage.
"Big companies are stabilizing, while smaller ones continue to perform below the contraction-expansion line," Zhao Qinghe, a senior statistician at NBS, wrote in a statement interpreting the data on Sunday. "The percentage of small companies facing a financial strain is considerably higher than that of bigger companies."
The NBS statistician forgot to add that in China virtually every "bigger company" is deemed too big to fail, as confirmed by the recent spike in corporate debt default bailouts by the Politburo. Because for all its posturing, China's vocal forray into deleveraging from 2013 is now nothing but a fond memory.
Reading across the details of the PMI report, showed a pickup in the activities of the construction sector. The reading of new construction orders jumped by 5.5 percentage points to 55.1, signaling demand recovering, according to the NBS statement. Perhaps China has once again managed to reignite is housing bubble, which had burst since early 2014, and where for 17 consecutive months housing prices in more than half of China's cities had declined. If so, expect the PBOC to care far less how the SHCOMP does over the next year as its primary goal, to rekindle the most important asset bubble for China, the one where 70% of China's wealth is kept, i.e., housing, has been achieved for now.
But while housing may be rebounding, trade isn't - new export orders showed declines in both PMI gauges, indicating the nation’s exporters are still challenged as they enter the final quarter of the year.
What was most troubling, however, was the ongoing deceleration in China's employment market. According to Bloomberg, the employment gauges of both manufacturing and non-manufacturing sectors remained mired in contraction zone, Sunday’s report showed. China’s survey-based unemployment rate picked up slightly to around 5.2 percent in September, while a ratio of job supply and demand rose in the third quarter.
Ultimately jobs in China are, or should be, a far bigger concern to the Politburo than even the housing bubble: as we reported previously, as a result of China's economic slowdown, suddenly jobs are becoming all too scarce. According to China Daily, competition for white-collar jobs became fiercer in the third quarter, with more than 35 job seekers contending for the same position on average. This is a jump from 26 and 29 in the first and second quarters this year, a Chinese human resources website said on Tuesday. As a further reminder, China's official unemployment rate rose from to 5.2% in September, and is now at least on paper, higher than the US.
* * *
But the most troubling aspect of the latest weak data is that it suggest s that China's massive credit injection impulse - the one deus ex which had previously worked without fail if only on a short-term basis - is no longer working.
Based on a report posted last week by China's wallstreet.cn, and translated by Chiecon, China’s state owned enterprises added almost 6 trillion yuan (around 1 trillion dollars) of debt in September, according to Luo Yunfeng, an analyst at Essence Securities, as “an unprecedented increase in leverage”. This means that not only is the government abandoning its deleverage policy, it is actually increasing leverage.
Latest Ministry of Finance data shows that by the end of September total SOE debt had reached 77.68 trillion yuan, representing a increase of 5.93 trillion yuan on August, and an increase of over 11 trillion yuan in 2015.
The report goes on to say that "with China experiencing slowing economic growth, and no turnaround on the horizon, its seems likely the Chinese government will continue to increase leverage. In September, China Merchants Securities stated that since Chinese government debt leverage ratio is still low, lower than the US, Europe and Japan, there is still more room for leverage."
What happens next: Haitong Securities said at the start of the year that in order to prevent systemic risk the focus over the next few years will be on government leverage. Based on the experience of other countries, monetary easing almost certainly follows an increase in government leverage, with interest rates in the long term trending to zero.
Just as we explained in "How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable" because before the page is closed on the current monetary system, everyone will be monetizing debt, all $200 trillion of it, just to give the status quo a few last gasps of air.
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No one knows the truth about Chinese economic or manufacturing numbers. It's all speculation.
As Mario said; "This slowdown is probably not temporary"
And then figure as you point out that the Chinee numbers are worse than BLS shams (More like Myth and Lore but without the rationale behind such) and what have we got?
Well, it's Not Good.
All them peasants without chicken in their pot. Going to get ugly.
Washington DC needs a BIG crisis to justify BIG "stimulus".... It'll make the $878,000,000,000.00 "shovel ready" stimulus look like pocket change.
of course the stimulus will be geared toward buying votes for HRC....so it'll be "student loan forgiveness" and "free college" and "broader heathcare subsidies" etc.
That explains the drops in the Saudi and UAE markets this morning.
Well, it's Not Good.
Then this means its bullish!
As a Chinese also do not know the real numbers.in micro ,i think the tradional industral like steel ,cement ,real eatate game is over now , If the GOV decide to releveraging ,then let me see cash flow ,if the cahs still flow to tradional industral , this is nightmare for Chinese econimy ,if the cash flow to other indutral ilke healthe care ,insurace ,education ,high thchnology etc , China economy will be rebounce in the future ,let us see right or left
That's okay. I just checked my wallet. I don't have a single Yuan-denominated note. In fact, I don't remember ever even having been offered any.
Mao was a butcher. He had to be. As his army roamed the countryside they had to eat. Typically, on the Long March the Red Army marched unopposed into town. And then they rounded-up all the capitalists and the cats and dogs too. All armies march on their stomachs. Marauding armies have to be fed.
At one point during the glorious revolution, China almost ran out of dog.
Mao's forces won the war because Mao gave strict orders not to raze the countryside as opposed to what the Nationalists did. The rich and the capitalists were left destitute and more likely dead but the peasants were pleased by how they were treated, at least until the Communists took full power they were. Mao was a butcher and pedophile who is now rotting in hell but he was smart enough to know to treat his power base well as long as he needed them.
and just how much "debt injection" has our stock market had since 2008? One lliar is no worse than the other. They're both running a planet sized con game and telling the masses everything is fine. EVERYONE knows better, it's just what happens next.
Yep. I do business with China from time to time on a side project (only because it is impossible to get some things from here in the USA). There is certainly something happening with the two large companies there that I deal with. It seems to have started about two years ago, a slow but steadily growing problem. Longer lag times, internal confusion, increased errors. Something has changed in the small sample my experience represents.
"Big companies are stabilizing, while smaller ones continue to perform below the contraction-expansion line,"
they do that on purpose in the usa. owebombacare will be the final nail in the coffin of small business AND the middle class. this is no accident imo. congress doesn't set the tax rate anymore. blue cross does. the maggots in gubbermint don't care because they get theirs for free.
Agree - Obama Care has nailed small business from both ends. Not only increased costs to small business but also the customer base has been nailed hard with hefty health insurance increases that have reduced their spending power.
People with less money = less local shopping and more likely to Go Cheap. For example, buy crap WalMart factory farm eggs vs fresh free range local eggs. And everything else that is cheaper, crappier, and non-local.
Obama Care actually helps destroy healthy lifestyles by contributing to the impoverishment of families. Way to Go!
absolutely correct. i made myself a promise. for every dollar my premium goes up i will cut back my spending by $2. i know i'm not the only one and it is going to hurt. the usa gubbermint has effectively mandated that large corporations will succeed and small businesses will fail. that isn't capitalism, it is fascism. i could've bought a new cadillac just for the cost of my 2016 increase in health care costs alone. fuck that. i'll never buy another new car or house as long as ACA is in place.
Bullish.
Sum ting wong......
dude.
it's time to let that one go.
We sum ting wonged some folks...
That one is finally losing steam. And if you are still replying using "nail guns" for a post it means you have no imagination.
What does it sum ting wonged anyway?
Upvoting yourself is indeed wong.
I fear the social disruption in China that will follow a recession.
Chinese are relatively well behaved. Now if you look at the behavior of our American inner city underclass and our rural wannabe militia underclass, you've got a serious problem on your hands.
I've never heard of rioting and looting in the countryside by militias. Maybe 100 years ago
What are they going to loot, the gas mart for a two liter soda?
leverage?
Archimedes:
Give me the place to stand, and I shall move the earth.
Said to be his assertion in demonstrating the principle of the lever; as quoted by Pappus of Alexandria, Synagoge, Book VIII, c. AD 340; also found in Chiliades (12th century) by John Tzetzes, II.130. This and "Give me a place to stand, and I shall move the world" are the most commonly quoted translations.
But even that fella would have deemed neo-Keynesian thinking batshit crazy.
and demonstrably so.
Of course - all this global "debt" is not going to be repaid, and most of it, one could argue, is odious - created by the very act of lending, horseshit, nonsense bullshit that we can not afford to squander productive work on going into the future just to fill the coffers of the 1% {or .1% if you think it's really just them} and of government treasuries.
Damnit man, we were promised jetpacks and flying cars and moon bases with fuck robots.
What a massive misallocation of time and energy has led us here.
i believe these numbers are just for public consumption
what's the REAL numbers?
Garbage in = Garbage out.
The numbers China prints are as fictitious as merika's. The difference between the two, is that China understates their GDP by as much as 15% and merika overstates theirs with Houdini numbers.
Time spent considering nbs data from china, us or europe is wasted.
A few weeks ago the world was coming unglued as fed was deciding on rates.
Now in a few weeks the worlds largest economies have stabilized.
As long as China can still manufacture printing presses, the global economy will continue to ROAR.
This is good for 30 S&P points Monday and a $50 smash in the paper gold price.
Amazing how close to expectations all China economic statistics come in. These really aren't statistics, more along the lines of, what the China government wants to report on how the economy is performing...
Sounds like more "good news" .
Just means more "free" fiat is on the way, so let the good times rolll!
FUBAAAAR!
That means the PB0C will be pulling the reverse repo cart out of the spare bathroom when China opens today. Probably some $usd strengthening as well.
Unless outflows get so horrific they start dumping UST.
Why take much notice of these latest figures? They're produced by the Chiese Govt. purely to further their objectives. Any resemblance to reality on the ground is purely coincidental.