This page has been archived and commenting is disabled.
China's Landing Getting Harder As Stimulus Fails To Prime Pump
The spread between HSBC's and China's version of Manufacturing PMI increased a little over the weekend when the headline of China's data point managed to cling perilously above the 50-line of expansion over contraction (while HSBC's drifts lower and lower under 50). The headline print - still its lowest since Nov 11 - however, hides a much less sanguine truth in the sub-indices with the new orders index fell once again staying in the contractionary territory under 50. What is more worrisome for China (and implicitly the rest of the world) is that while transport equipment and electrical machinery improved (explicitly thanks to government funded infrastructure projects) there has been no multiplier effect of a broad-based investment rebound.
As Credit Suisse notes: "The stimuli launched in middle of May seems to have failed to jump-start the overall economy, yet the moderation in PMI is not severe enough to justify a much more aggressive rescue package. Stripping out the direct benefits from Beijing’s stimuli, we think the economy is still moving downwards."
It seems the harsh housing policies are limiting any ability to bring out a big bazooka from fiscal or monetary and perhaps, just perhaps, the Chinese are languishing at the start of a housing-fueled balance sheet recession-style weakness - though it appears (given the weak demand, increased input prices, and drop in new export orders) that global growth contagion is just a painful for the Chinese as for the rest of the world living off their teet.
Credit Suisse: Policy implications
The stimulus measures launched in middle of May seem to have failed to jump-start the overall economy, yet the moderation in PMI is not severe enough to justify a much more aggressive rescue package, in our judgment. Despite improved orders in machineries, the overall order flows were rather disappointing. Stripping out the direct benefits from Beijing’s stimulus measures, we think the economy is still moving downwards. Given that most of the funding has been one-off in nature from the central government’s budget or a bank loan, if the package cannot lift growth in June and July, it probably won’t. Still, headline PMI remains in expansionary territory, so we do not anticipate another major stimuli on the horizon.
We continue to expect three more cuts to the RRR (one cut per quarter) and two more cuts in the lending rates (once per quarter), but do not believe that monetary policies will be effective given that the economy appears to be in a liquidity trap.
Fiscal policy may be a little more effective, but most policies probably cannot be unleashed until March 2013 when the new administration comes into office. Unless the economy shows more concrete signs of a hard-landing, we expect only a piecemeal approach from Beijing in terms of growth promoting initiatives.
Housing policy is probably is a more effective policy measure than monetary or fiscal policy, in our view. We do not expect Beijing to remove the harsh headline statement about being “unwaveringly firm” against speculations in the property sector, but do expect it to be less restrictive on local government measures to help the local markets. With transaction volumes continuing to rebound, we think construction activity in the nonmanufacturing PMI due on 3 July is an important data point.
Meanwhile, we continue to warn that deflationary forces are gathering, supported by the very weak input price index. This development may affect a series of market behaviors, from consumption to investment.
»
- 5996 reads
- Printer-friendly version
- Send to friend
- advertisements -
china?? isnt that what grandma would put on the table for christmas??
According to Jim Rogers, China's prospects are 'cloudy' until at least 2014:
http://www.planbeconomics.com/2012/06/12/jim-rogers-chinas-prospects-cloudy-until-2014/
Piles of coal are building up...
Electricity usage is down...
http://www.planbeconomics.com/2012/06/25/chinese-data-mask-depth-of-slowdown-executives-say/
As long as the government keeps the ban on Property Purchase. You won't get the consumption of energy or coal like in the past years.
Hhhmmm, a ban on ownership, WINNING!!!!! LMFAO!!!!!
Ah, perhaps the "stress" of importance in owning PM discouraged "investments" in properties and stocks?
I wonder if they have a "phrase" (the Great Leap) for this?
I suspect that would make the west's prospects 'Hurricane force winds and torrential rain'....
What three national disasters are most likely to occur on Thanksgiving Day?
The downfall of Turkey, the breakup of China, and the overthrow of Greece.
A little levity with your morning coffee... ;->
Disinflation -----> Deflation ------> Depression ------> CB coordinated action which leads to only temporary asset price inflation before it all begins again.
US wages set to fall year over year.. getting very close.
so the corporate oligars will in-source?
There is much misunderstanding about how PMIs are calculated. Blow 50 does not necessarily mean "contraction". China's manufacturing is still expanding at 10% p.a. or thereabouts:
http://www.smh.com.au/business/how-a-statistical-misreading-can-unleash-...
Totally irrelevant bullshit. China makes their numbers whatever they want to be. 100% state-run, state-manipulated, and this is a country being taken seriously as a contender for holding the reserve currency? Please, this will send all physical assets and PMs to the fucking moon. Oh wait, on second thought, bring it!!!
So US run by OBAMA AND BENENKE IS dollar bullish.
You forget. Obama is China's man. He works for the CCP
Wow, completely lacking any intellectual content - expected for a chinese citizen.
Does not change the outcome one bit. China was given unprecedented access to American markets, period. The U.S. elites and China have been on the same page since the collapse of Russia in the early 90's. Wake the fuck up, got physical assets of real value? You better, because no-one devalues fiat better than the Chinese.
the world is stimulus weary despite dickhead Krugman's efforts. Too much debt already exists
No Big Stimulus for China Even If Slowdown Worsens
http://www.cnbc.com/id/48037902
http://media.cnbc.com/i/CNBC/Components/Art/Blogs/Blog_Redesign_Dot_Line...) !important; height: 2px; line-height: 2px; font-family: Arial; font-size: 20px; text-align: left; background-repeat: repeat no-repeat;">Have to appreciate that China went from making 9 million cars in 2008 to 18 million in 2010 .. they built 18.7 million in 2011, and in first quarter of 2012, sales were down 3.5% year over year for cars in China.. a slowdown from a huge boost.. but still adding a hefty amount of cars to the roads.
If only Mars was buying. < sigh >
Ask any 80 year old dude, who pretends he is mid-life. Just need to double down on the blue pill and add some lube.
Problem solved.
In April 2008 the IMF again stated that Australia's property market was overvalued and close to 25% higher than could be explained by changes in underlying fundamentals.[32] Other analysts argued that the rise in property prices was explained by peculiarities of the tax system.
In April 2010, The Economist house price indicators estimated Australian house prices were the most overpriced in the world, at 56.1% overpriced (against long-run average of price to rents ratio).
http://en.wikipedia.org/wiki/Australian_property_bubble
China’s Manufacturing Growth Weakens As New Orders Drop
http://www.bloomberg.com/news/2012-07-01/china-june-manufacturing-pmi-50-2-vs-economists-est-49-9.html
Now, Here's a Major Sign China is in Serious Financial Trouble
The Latest on China's Crashing Economy
Asian countries will be the primer and pump.
Taiwan to Allow Local Companies to Issue Yuan-Denominated Bonds By Tim Culpan - Jul 1, 2012 5:46 PM CTTaiwan will allow local companies to issue bonds denominated in Chinese yuan in order to provide them further sources of funds, the Financial Supervisory Commission said in a statement on its website yesterday.
Bonds would be issued in Hong Kong or through overseas banking units, the statement said. The regulator also plans to ease restrictions on Taiwanese asset managers’ investments in Chinese securities and allow local financial institutions to offer yuan-based products such as deposits and remittances, it said.
If the rest of the world is BROKE, who are the Asian countries selling to again? Mars?
selling to each other.
So replacing one circle jerk with another - "winning".
Thanks for clarifying, LMFAO.
All the data from the chinese government has been smoothed out to glorify their own existence. In another word, all lies. just remember that.
This is funny! The Chinese (you know the country that ownes most all of the natural resources in the world) can prime the pump with cash and not worry about the economy for 10 years forward, and we are discussing them rather than the US that is priming the pump with debt and it’s not working. Simply amazed.
LMFAO!!! Possession is the law now bitch. But you are correct, no one knows how to devalue a fiat currency better than the Chinese. Fine with me, make all my physical assets worth that much more. Bring it!!!!
it's like us factories use different means of reporting gnp and gdp. the first is what is produced inside the country is counted, and the 2nd is what is produced by the same company regardless of where in the world they are located. pretty shady by any standards
China has successfully switched to the service economy, where whorehouses are at every street corner.