Tags: china | fed | rates | economy

Economic News Out of China Continues to Disappoint

Economic News Out of China Continues to Disappoint

By    |   Monday, 01 February 2016 07:44 AM


The official Manufacturing PMI for the month of January, which is released by the National Bureau of Statistics of China, came in at 49.4, which was its lowest level since August 2012 while it remained in contraction territory for the sixth month in a row.

The official Non-Manufacturing PMI came in at a 3-month low at 53.5.

The private Caixin General China Manufacturing PMI came in at 48.4 in January and remained hereby below the crucial 50.0 value that separates growth from contraction for the eleventh successive month and in fact confirmed the official PMI numbers.

All this confirms the Chinese economy continues to slow down, which is bad news for world growth.

The fact that also the employment indicators in all three Chinese PMIs continue to show prolonged contraction should put investors, who are interested in investing in the Chinese markets, but also globally over the short term, could maybe, be better off by remaining on watch for accidents to happen, which I think will happen and that includes, all what is economic and financial related, also geopolitical risks.

Maybe it’s only anecdotal, but, and as completely the opposite to what the German-born architect Ludwig Mies van der Rohe (1886–1969) said “God is in the detail,” real life experience has taught us: “The devil is in the detail.”

In this context, on January 21, 2015, the Shanghai authorities published on the city’s Science and Technology Commission website a regulation that reads, “Venture capital (VC) firms that invested in high-tech startups in Shanghai since the beginning of 2015 can apply for government compensation if their investment loses money.”

The Shanghai rules also say the capital for payouts will come from the city’s public finance bureau, which co-authored the regulation while a committee will review and decide whether to approve a VC investor’s request.

Even in China this Shanghai rule has caused sharp critics, and with good reason (!), notwithstanding other local governments in China have implemented similar rules before but none of them has offered quite as much compensation as in Shanghai.

Everybody can think about it what he/she wants, but to me this shows China has still a very long way to go, with many potholes in the road, before it will reach the economic and financial standards, which are not perfect, we live in here in the “West.”

On China but also in the global context, as an investor, I’d prefer to remain extremely cautious for some time to come.

For commodity and mine stock investors, the latest news out of China is simple bad news that can’t support, at least not over the short term, any sustainable price recovery.

This situation will probably also extend and, who knows, expand the “deflationary” pressures that most developed economies have to cope with these days and where “Monetary easing” policies under all their forms that include “negative interest rates” as applied by some, not all, important Central Banks of the world have remained “mostly” unsuccessful in reviving “inflation.”

As this is very important, maybe it’s good to remember long-term investors, which of course don’t include the real risk-takers and risk–players, a “deflationary” environment favors without any doubt “cash” and besides that little anything else.

I mention that because many still believe a real “sizable” correction (=bear market conditions) is not in the cards, yet.

I personally think I wouldn’t be so sure of that.

When we look at the two notorious “busts” of this century, the one of 2000, which started on March 24, 2000 and that saw a decline of 49.1 percent, and then the one of 2007, which started on October 9, 2007 and that saw a decline of 56.8 percent, I don’t think it’s an overstatement to say, what we have seen recently in U.S. markets, is nothing more than “peanuts,” which of course doesn’t mean we are at imminent risk of a sizable bust like the 2000 and the 2007 ones, but it can’t be discarded either.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments. To read more of his articles, GO HERE NOW.

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HansParisis
I don’t think it’s an overstatement to say, what we have seen recently in U.S. markets, is nothing more than “peanuts”, which of course doesn’t mean we are at imminent risk of a sizable bust like the 2000 and the 2007 ones, but it can’t be discarded either
china, fed, rates, economy
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2016-44-01
Monday, 01 February 2016 07:44 AM
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