It’s not working out for Xi Jinping. Not on the macro-market front, anyway.
PMI data for January, released on Wednesday, suggested China’s manufacturing sector spent a fourth month in contraction, underscoring the Party’s struggles to revive an economy which, like the path of Jules Winnfield’s righteous man, is beset on all sides.
49.2 on the official NBS gauge was marginally better than December, but still lackluster. “Sentiment in the economy has had some improvement,” lied a Party functionary, in a statement. A tenth of a point here or there (December’s headline was 49) would be meaningless for any PMI, but in this case, we’re talking about data released by bureaucrats beholden to tyranny.
China’s factories have signaled an expansion in the survey just one time in 10 months, and then just barely (50.2 in September).
The improvement in January (if that’s what you want to call it) was almost entirely attributable to less bad readings on external demand. China’s problem is domestic demand.
The non-manufacturing PMI printed 50.7, the “best” reading since September, by one tenth of a point. Although the services component did manage to make it back above the 50 demarcation line (or maybe it’s better to say the NBS managed to say it did), the gauge hasn’t signaled a meaningful expansion since July, and the construction gauge (the other non-manufacturing component) slipped to a three-month low.
As discussed at some length in the latest Weekly, the juxtaposition between China’s struggles and the joie de vivre on display across the US economy could scarcely be more stark. The same disparity is reflected in relative equity market performance.
On Wednesday, the Mainland benchmark surrendered all of the gains notched during a fleeting rally sparked by the mainstream financial media, which dutifully circulated rumors about a two-trillion yuan stock rescue package earlier this month.
What’d I say, folks? “Fool me once.” The index now sits at a five-year low. January’s 6% decline was the sixth straight monthly loss. That’s never happened before.
The PBoC last week pre-announced an RRR cut and a hodgepodge of other measures, but it’s the same story again and again: China needs big-ticket fiscal stimulus. If the private sector won’t spend, the public sector needs to, and while local governments may be over-leveraged, the central government certainly isn’t.
One EM strategist quoted by Bloomberg on Wednesday summed up the PMIs: “There’s no signal of a turning point here.”
Sounds like a “the beatings will continue until morale improves” moment for Mr. Big China.
More than a little ironic that the overperformance of the U.S. economy vis-a-vis almost every other major economy in the world is due, in no small part, to the major fiscal spend passed under both Trump and Biden — packages that large numbers of one party continue to rail about.
And all the people shouting, “Inflation happened, MMT was wrong!” are silent on subsequent American economic exceptionalism. Worse, they’re not silent because they’re embarrassed at having been demonstrably wrong, they’re silent because they don’t even realize that the outcome (including the inflation) are exactly what MMT would suggest should be expected.
I have often wondered if H ever thinks to himself, the following:
“If my answers frighten you, then you should cease asking scary questions” 🙂
As a half-Chinese person, I feel comfortable extending a familiar maxim to include falling chopsticks.
And while Biden and the Fed have reasonably gotten us into soft-landing airspace, there’s still a lot of talk about inflation with nary a peep about corporate profit margins. Instead, we need to drill more, slow the roll on onerous minimum wage increases, and cut through government red tape. Meanwhile natural gas prices are at their lowest levels since the post-pandemic seize up, and, out today, farm prices are down 18% over the last year. Actual deflation in both cases.
https://us.econoday.com/byshoweventfull?fid=591597&cust=us&year=2024&lid=0#top