China’s Economy Is Finally Making Some Moves

China’s Economy Is Finally Making Some Moves
Daniel Johnston

3 months ago2 mins

What’s going on here?

Fresh data out on Thursday suggested that China’s economy might finally be making moves, if you wade through the bad bits, that is.

What does this mean?

China’s economy has been a real downer this year, and pundits will take what they can get at this point. So sure, an index tracking activity in the country’s all-important manufacturing sector shrank for the fifth-straight month in August. But hey, it wasn’t as much as economists expected and it edged a little closer to flatlining. These days, that’s a win. Mix in a measure of new orders creeping up in the sector for the first time since March, and whispers are spreading that the worst may be over. Maybe that’s because the government’s efforts are working or maybe it’s wishful thinking – but either way, it’s a tiny shred of hope for China’s manufacturing-heavy economy.

China factory activity

Why should I care?

The bigger picture: Good news, if you look hard enough.

Still, measures of non-manufacturing activity – think services and construction – are on the decline. But as we’ve learnt, you need to dig to find the good stuff: services like transport, accommodation, and entertainment did alright last month. The blame, then, may land on the country’s troubled property sector. If that’s the case, the government needs to ramp up targeted support initiatives, or risk seeing small victories give way to massive failures.

For markets: What goes up must crash down.

Each promise of government economic support seems to be followed by a market rally, but every time they fizzle faster than the last as investors realize that not much actually changes. That’s a toxic relationship, one that’s left China’s main index a little battered this year. So with jaded investors far from won over by existing measures, many analysts reckon the government needs to unleash its beast to win them over – potentially one like the half-a-trillion-dollar stimulus package it rolled out in 2008.

CSI 300
Source: Google Finance


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