Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Manufacturing Numbers Show Cause for Concern in China

Economics / China Economy Feb 18, 2014 - 01:34 PM GMT

By: Submissions

Economics

Richard Cox writes: As the global recovery continues to progress, investors as keenly focused on developments in early Asia as a means for gauging whether or not the progress in economic growth is being seen in all areas.  Without clear evidence that emerging markets in Asia have participated in the improvements, there is less reason to believe that the global recovery is moving forward as strongly as had been thought previously.


The latest cause for concern in these areas can be seen in Chinese manufacturing data, which came in lower than market expectations for January.  Of course, the manufacturing sector is a key driver of economic growth in China, so weakness here could be seen as limiting the potential in other areas of the domestic economic (for example in imports and consumer consumption).  The leadership in China has expressed the desire to start to show less of a reliance on the export of low-end manufacturing items.  But if China is not even able to post consistent progress in areas that have been the essential piece of its growth results over the last two decades, these goals start to look less realistic. 

January Manufacturing Numbers

“For January, the HSBC Purchasing Managers' Index (PMI), showed that the monthly manufacturing performance dropped to 49.6 for the period,” said Sam Kikla, markets analyst at BestCredit.  “This is firmly below the 50.5 reading that was seen in December.”  But what is most important about this data is the fact that any performance below the all-important 50 mark is representative of contraction.  So, we are not only seeing declines relative to the previous month, but we are also seeing a decline in the overall productivity result (which, in theory should grow consistently). 

This is the first time in six months that the PMI reading has fallen below the 50 “line in the sand,” and this ultimately suggests that the stronger push that marked the last half of 2013 might now be coming to an end. 

Potential Policy Changes

But even beyond the simple changes in economic trends, there could continue to be policy changes that aim to reform the structural need for China’s manufacturing base to remain consistent and stable.  Policymakers will continue to face new challenges if we start to see regular misses in these types of figures as we head further into 2014.  Of course, the primary concern for Chinese policymakers is to maintain an improving rate of growth, as this is seen as a precursor in guiding foreign investment and the country’s prospects for exports in other areas of the world. 

Policymakers in China have so far cited weakness in domestic demand conditions, and this ultimately undermines the goals in the Chinese government to stoke this area of its economy and provide a means for greater self-reliance.  For these reasons, it will be important to continue watching developments in the PMI figures in order to gauge whether or not the numbers are a one-off anomaly or evidence that the broader trends are changing. 

Richard Cox is a university teacher in international trade and finance. Lessons in macroeconomics and price behavior in equity markets. He writes for MarketBulls.net, BinaryOptionShark.com,TheStreet, Seeking Alpha, and the Motley Fool.Investing strategies in these articles are based on technical and fundamental analysis of all the major asset classes (stock indices, currencies, and commodities). Trade ideas are generally suggestive of time horizons of one to six months.

© Copyright Richard Cox 2014

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules