China Activity Gauges Plunge As Lockdown Hit Revealed

China Activity Gauges Plunge As Lockdown Hit Revealed

You know things aren't going well in China when even the official numbers are bad. Manufacturing and services sector activity decelerated dramatically in April, PMIs released Saturday showed. Both the official gauges and the Caixin factory gauge were extraordinarily weak, reflecting the impact of lockdowns. The official non-manufacturing PMI plummeted to 41.9 (figure below). Analysts were openly skeptical of China's Q1 growth figures which, to some, suggested Beijing may have used the suspi
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2 thoughts on “China Activity Gauges Plunge As Lockdown Hit Revealed

  1. Let’s look in the half-full glass. First, we’re not (most of us) in China facing lockdowns. Second, Xi will crank up the tried-and-true stimulus dials to get growth up, which means construction, which means certain commodities. (Maybe some domestic China stocks too, but I’m not playing that game.)

  2. Walt –
    There’s an overriding question I cannot help but ask you and your readers: Where does China go from here?

    Ever since I saw Richard Nixon visit China, I have appreciated the steps the Chinese have taken to open up their economy. China has provided useful services for the entire developed world, producing quality goods at a reasonable price – everything from clothing, tools, and machine parts to appliances and cars. Almost everything, basically.

    But frankly, over the bulk of time since Nixon, though the Chinese have done some very good things, I’ve had a persistent and unfavorable feeling in my gut. In recent years, what they did to Jack Ma, and other Chinese companies, along with the Chinese property crisis (ghost cities), loudly expressed dominance of the CCP vis-à-vis Hong Kong and Taiwan, and how they have generally managed their internal affairs raises alarms for me. I’m concerned the country’s economy is too much of a black hole. I suspect I’m not the only westerner who has had this gut feeling all along.

    As of today, I believe that they are not a reliable partner to supply the US economy. Sinovac has completely failed, and they’re locking down their cities (and factories) as a result. I believe the lack of persistence in the Chinese supply chain is actually a threat to our economy. Inflationary impacts in the US that resulted from the pandemic and the long supply chain to China are set to be amplified by impacts on fuel and food supplies due to the Ukraine war. And in the long term, as I understand it, the Chinese population is expected to drop substantially. And will continue to drop precipitously over this decade and beyond. Lastly, Xi’s affection for Putin is loathsome in the eyes of the world. I’m curious to see how Xi is going to handle that on the world stage as the war evolves.

    I know you have your eye on China, and you write about it with some regularity. But I believe the Chinese communists are taking a turn, and not for the better. I feel they’ve been narrowing their view of capitalism for a while, trying to balance it with their particular brand of communism. And the broader set of issues the world is contending with are not helping matters for our relations with the Chinese. I feel that any initiatives in the United States to pull production of products out of China are merited, and should be done as quickly as possible, however it can be accomplished. I believe American business should tend to turn away from China overall. And while it is a substantial market today, I don’t believe it will remain so.

    Hope you’re well, sir. I really appreciate the quality of your work, and the volume that you produce – day in and day out. And it’s a great place to share ideas and hang out!

    Cheers,
    Dave

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