November 23rd, 2011
04:28 PM GMT
Hong Kong (CNN) – China's mighty industrial machine is stalling. New figures today show something that will be worrying authorities.
First the broad numbers: An index put together by HSBC – with no government input - shows a reading in November of 48. Anything over 50 shows that factories are increasing production, under 50 they are cutting back.
The figure is perhaps not surprising given that China's two big export regions, Europe and the U.S., are in deep trouble. But it's not exports that are drying up, it is local demand. And that could be a problem.
Export orders actually grew in November, while domestic demand shrank as a result of all the moves taken by the Chinese authorities over the last 18 months to cool the overheating property market.
Those moves are working, but the consequence of that is less demand for household goods made in China.
Combine the latest manufacturing numbers with the news earlier this week that the level of property transactions have slowed sharply and the Chinese economy is in retreat on two key levels.
Does it mean a so-called “hard landing” for the Chinese economy, where growth collapses and recession takes hold? Very unlikely.
The numbers do bring forward the possibility of action from the central authorities to boost growth, but don't expect a "big bazooka" approach for China. It's much more likely to be some smaller moves targeting specific industries and sectors.
At the moment, the figures show that the moves China has taken to cool the economy are working. The fear is that they may be working too well.
About Business 360
CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.