Important consequences..
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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]
