EconoChina

A blog on Chinese economy & society

Chinese slowdown is here to stay

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The HSBC China PMI fell to 49.4 in July, showing a contraction in the economy. Although the government’s PMI for July was reported at 51.2, and still expanding, this distinction is largely superfluous as the deceleration is obvious from both accounts. The government’s survey differs from that of HSBC in that it focuses more on large and state-owned companies.

The economic slowdown, though expected, still buoyed the Chinese and regional markets. Are their hopes for new stimulus justified? I would think no.

The side effects from the first try are still very pronounced in China. CCTV, China’s state-owned television station and not exactly known for exposing the darker underbelly of the nation, ran a program recently about a “ghost city” in Tianjin, housing developments that are largely vacant due to speculative demand. Inflation on foodstuffs is over 10%. Contrary to popular belief, the 1989 Tiananmen Square protest was really driven by runaway inflation. So the CCP, mindful of their “mandate of heaven”, will most likely stay on the cautious side and refrain from having another puff of addictive stimulus.

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Written by Cindy Luk

August 3, 2010 at 1:33 am

Posted in China, Macro

Tagged with , , ,

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