Chinese Stocks Slump, Manufacturing Slows:

on . Posted in International Investments


China  PMI barely Above Contraction; Chinese Stocks Slump as Manufacturing Slows

Bloomberg reports Chinese Stocks Slump Most in Three Weeks as Manufacturing  Slows

China’s stocks fell, dragging the benchmark index down the most in  three weeks, as data showed the country’s manufacturing growing at a slower  pace.
The Shanghai Composite has slumped 9.7 percent from a Feb. 6  high, on concern slowing growth will hurt earnings. China’s economy expanded 7.7  percent in the first quarter, missing estimates, as industrial production and  fixed-asset investments in March fell short of forecasts. Rising Chinese home  prices may limit scope for stimulus as President Xi Jinping seeks to prevent a  real-estate bubble.
“This has been a very narrowly based recovery,  predominantly driven by infrastructure investment, but now even infrastructure  investment is also apparently slowing down,” said Tao Dong, head of Asia  economics excluding Japan at Credit Suisse Group AG in Hong Kong.

China PMI barely Above Contraction
As I have said on  numerous occasions, China's infrastructure build-out is both ridiculous and  unsustainable. Yet that does not stop for one second the cheerleading.
For example please consider the Markit report headline for China Manufacturing  that shows Operating conditions improve marginally in April

It is really tough to spin that stagnation, assuming you  even believe it (I don't), into something positive. Hongbin Qu, Chief Economist,  China & Co-Head of Asian Economic Research at HSBC managed to do just  that.
Qu stated "The HSBC Flash China Manufacturing PMI came in at a  two-month low, but still managed to expand modestly in April, albeit at a much  slower pace. However, new export orders contracted after a temporary rebound in  March, suggesting external demand for China’s exporters remains weak. Weaker  overall demand has also started to weigh on employment in the manufacturing  sector. Beijing is expected to respond strongly to sustain the economic recovery  by increasing efforts to boost domestic investment and consumption in the coming  months.”
50.5 is "modest expansion"?! Would 49.5 have  been "modest contraction?"
Let's at least be honest about this. At best  China is stagnating and this is in spite of an unwarranted and unsustainable  infrastructure build-out.
Mike "Mish" Shedlock