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Monday, August 27, 2012

Chinese Manufacturing Is Crashing - Unsold inventories piling up - European and US Recession cuts demand for Chinese goods

In a picture taken on March 5, 2011 a Chinese ...
Beijing reported that China produced a record amount of steel in July,
 but prices are plunging  and steelmakers have been defaulting on agreements to purchase iron ore.
(Image credit: AFP/Getty Images via @daylife)
The HSBC Flash Purchasing Managers’ Index for August crashed, falling to 47.8, well under the final July reading of 49.3.  The dismal result, the first indication of China’s economy for this month, was far below 50, which divides expansion from contraction.  The final PMI will be released September 3, but it is now clear that August will be the 10th-straight month of decline for the vitally important manufacturing sector in China.

Thursday’s release of the Flash PMI stunned analysts.  Earlier, most of them had confidently predicted China would show signs of growth in July because of Premier Wen Jiabao’s late-spring stimulus program.  There was, however, no uptick last month.  In fact, July’s indicators were extremely disappointing.  China watchers then thought August would be a time of recovery.  The Flash PMI, however, suggests this month will be even worse.
It’s hard to see how manufacturing will recover soon.  Manufactured goods are stockpiled at record highs across China.  “My supplier’s inventory is huge because he cannot cut production—he doesn’t want to miss out on sales when the demand comes back,” said Wu Weiqing to the New York Times.

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