The Year of the Snake

Seen in Bloomberg Businessweek (July 24, 2013) – By Alan Wong

“China Manufacturing Weakens Further as Slowdown Deepens” – That was the headline. It doesn’t tell the whole story, but here’s some of what the article stated:

“China’s manufacturing weakened by more than estimated in July, according to a preliminary survey of purchasing managers that casts further doubt on th government’s ability to meet its annual economic growth target …

“After facing down banks with a funding squeeze, China’s leaders yesterday pledged a five-year ban on construction of new office buildings for the government, the Communist Party and state enterprises. Premier Li Keqiang’s efforts to rein in credit, property prices, and officials’ extravagant spending risk worsening a slump even as state media say 7.5 percent growth is the lower limit for this year.

“‘The key thing now is confidence,’ Qu Hongbin, HSBC’s chief China economist in Hong Kong, said on Bloomberg Television. ‘The confidence now is pretty weak both in the financial market and the corporate sector.’

“Authorities signaled this week that they may protect growth of 7.5 percent this year and 7 percent in the future, stoking a China stock rally yesterday on speculation policy makers will boost spending on railroads and environmental gear to support the economy.

“The government will probably plan additional spending that isn’t a ‘big stimulus’ like 2008’s 4 trillion yuan ($ 586 billion at the time) plan and is instead meant to put a floor under the growth slowdown, Qu said …

“Lack of efficient demand, overcapacity and small companies’ difficulties with labor costs and financing contribute to the uncertainty and pressure on growth, Zhu Hongren, spokesman for the Ministry of industry and Information Technology, said at a briefing in Beijing today.

“China banned government and Communist Party agencies from constructing new office buildings for five years and told them to suspend projects that have already won approval as the country seeks to cut wasteful spending. Agencies should ensure that limited government funds and resources are spent on developing the economy and improving the public’s well-being, according to a statement yesterday.” –

[That’s the “party line” – but here’s the bottom line. Bloomberg and Chinese authorities just don’t seem to get it. Either that or they’re lying to their flocks. “Lack of efficient demand” is the only truthful phrase in this entire story. The U.S. consumer does the demanding – China does the supplying. The U.S. economy is collapsing, and China’s is following suit. It’s that simple.]