China – Rising Or Falling?

Important consequences..

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There are many signs that the Chinese economy is slowing down

After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses. [New York Times]

Even the official PMI has now fallen into contraction area (below 50) as of today (Sunday September 2). Such is the apparent slowdown that even corporate profits are falling:

Earnings fell by 5.4% in July from a year earlier. That compares with a 1.7% annual drop in June. Chinese firms have been hurt by a slowdown in global demand as well as lackluster domestic consumption. [BBC]

However, according to Steven Roach, this doesn’t mean a hard landing is in the cards. Comparing the 2008-09 recession with what is going on today:

This time, the descent has been far milder. From a peak of 11.9% in the first quarter of 2010, China’s annual GDP growth slowed to 7.6% in the second quarter of 2012 – only about half the outsize 8.2-percentage-point deceleration experienced during the Great Recession. [Steven Roach]

[Read on here]