Traders “snubbed risks,” one headline read on Wednesday, as equities looked for more gains. The S&P came into September riding a seven-month win streak.
Although the US labor market is set to command investor attention in the latter part of the week, China refuses to relinquish the limelight.
There was fresh evidence to support the slowdown narrative on Wednesday, as the Caixin gauge showed manufacturing activity contracting for the first time since the immediate aftermath of the pandemic shock (figure below). Not only did the headline fall to 49.2, the output index dropped more than three points to 47.7 and the new orders gauge was the lowest since April of last year.
“The reappearance of COVID-19 clusters in several regions beginning in late July has dealt a blow to manufacturing activity,” Wang Zhe, Senior Economist at Caixin Insight Group, said. “Both supply and demand in the manufacturing sector shrank as the outbreaks disrupted production.”
Employment shrank too and inflation pressures “remained high,” the survey said. The COVID issue was described as “a severe challenge to economic normalization.” Notably, overseas demand dropped.
The poor showing came a day after official PMIs suggested the services sector contracted in August and amid Xi’s ongoing regulatory push which Bloomberg’s Garfield Reynolds described as a “divorce from capitalism.”
“Rewarding innovative companies by suddenly telling them they are too profitable, or that they have been running their businesses all wrong, won’t result in a stronger economy,” Reynolds remarked. (Nobody tell Garfield what “CCP” stands for.)
Rabobank’s Michael Every on Wednesday released a sweeping assessment, which he summarized as an effort to contextualize Xi’s societal overhaul via “the history of Marxist-Leninist-Maoist thought.” (The title of this brief article borrows from one of the subsections of his 15-page report.)
“While the West considers economic thinkers of the past to be exactly that — of the past — China is not just paying lip-service to Marxism, it is taking cues from the roots of Marxist thought traditions, while adding modern-day interpretations in order to choose its own path,” Every wrote, adding that,
With the Western capitalist system clearly in trouble, China’s leadership feels emboldened to push ahead in this regard. Whereas in the West change is gradual, or nonexistent, and usually part of a democratic model in which consensus is required, in China far more dramatic changes can happen suddenly if needed for the perceived greater good. Such changes are happening, and are currently speeding up, not slowing down.
That kind of analytical lens is always better in my view, but not always particularly useful on a day-to-day basis for traders. It may soon become indispensable, though. Or at least as it relates to China. And let’s face it, everything relates to China these days.
The problem: One doesn’t simply become well-versed in political economy overnight. If you’re a freshly-minted analyst covering, say, Chinese EdTech, you can’t just go to sleep with a copy of Das Kapital on your pillow and wake up with a new perspective courtesy of osmosis.
To be fair, there’s also little need for such deep analysis.
Banning social criticism is authoritarianism 101, not particularly Marxist, though communist dictatorships will use the language of the masses and their social consciousness etc. just like religious theocracies will refer to purity, spirituality etc. but, in practice, the aim is the same : silence all opposition.
Banning games and social networks etc. is even more pathetic. It’s down to café bar philosophy. You’ve likely seen it: drunken assho*e telling everyone “I’ll tell you what’s wrong with society these days, yessir, burp. It’s those damn kids and their phones” (or the immigrants ; or the Jews – in less funny versions). Basically, screw all those complicated sociological studies and stuff, let’s go back to gut feels.
Communists (if not Marxists) always had bourgeois envy. Which is why the Soviet ideal kid was always working hard at school, learning the violin and playing previously elite sports (gymnastics, ballet dancing) at a high level… while banning porn, TV soap operas and now social media and basically everything everyday people actually want.