November 23rd, 2011
04:28 PM GMT
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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.



soundoff (24 Responses)
  1. Steve Thompson

    As recently as a month ago, the IMF projected that Asia's growth will still remain robust with China experiencing 9 percent growth in 2012 and India experiencing 7.5 percent growth as shown here:

    http://viableopposition.blogspot.com/2011/10/chinas-impact-on-its-neighbours-and.html

    November 23, 2011 at 5:07 pm |
  2. johnny

    This is not only happening in China, its global. But I think China wants to channel most of its export products towards local consumers. Which means China cutting down on its foreign exports substantially for the next few years. Chinese economic experts are taking such contingent measure in order to preempt and cushion the effects of any possible global recession. And this idea should work well because wages in China have since gone up by about 30% from a few years ago.

    November 24, 2011 at 1:34 am |
  3. EM

    Naw. It's not stalling. No problem at all. Let's move on.

    November 24, 2011 at 3:00 am |
  4. sgtgismo

    If the industrial machines are stalling, it may be due to proper need of lubrication. Try WD40/liquid wrench/ or some of three-in-one oil which may help it run much better.

    November 24, 2011 at 3:23 am |
  5. Jack

    I'm an expat living and working in China for the past eight years. The market is controlled and planned. This time next year the real estate market in China (especially in Shanghai) will be going up, not down. Guaranteed! It is difficult to comprehend China as a market economy, because it won't work. If China was a true market economy today (without all the corruption) the market would collapse. But, because bribery is a multimillion dollar market by itself in China, it's unlikely that China will be a market economy anytime soon.

    November 24, 2011 at 5:22 am |
  6. Chris

    I'm an expat living and working in China since early 1997, also running my own sales outsourcing business to support US SME export sales. As much as Chinese don't want the market to collapse, there is no real foundation holding it up. There is way too much overcapacity in RE to ignore. Jack, did you realize the "entrepreneurial geniuses" of Wenzhou, the ones with factories and loads of empty properties in hand, are skipping town because export sales are way off and their Ponzi scheme financing has all but dried up. They all want to unload their their "RE investment portfolios" but buyers aren't stupid enough to buy. Yes, it is a planned economy and so very difficult to know exactly how it will play out, but I think the Gov has its limit on how much money it will throw at supporting empty RE projects. Personally, I consider the current China situation (economically and socially) as highly dynamic and unpredictable. I am watching very closely and remaining nimble.

    November 24, 2011 at 6:15 am |
  7. SF

    Jack/Chris, hold on a sec. arent we looking at the bigger picture outside of China? My concern is, will what the article here says happen considering the fact that US and EU is sick and China is looking at them as a main exporter? Both you gentlemen has outlined the internal situation as at present and calculated the future based on the present internal situ, however, external pressure and effects on the export side is a major dependency which the Chi.gov. does not have a control on, considering this, does the market look bad for its internal situ in the coming months, perhaps the effect showing these signs during the medium term? I suppose one way of artificially creating a momentum would be for the chi. gov to create a demand through their own investments in these two regions, which we have heard a lot of happening lately.

    November 24, 2011 at 7:35 am |
  8. Asif

    go to International CNN frontpage and notice how many news are related to china...more than 3.. when western media want to create hype for their propaganda..they just fill the front page with the same news with different headlines... to give impression as if world is going to collapse.. and when they want to hide something..you will hardly find that news for few minutes on front page.. US has highest crime rate in the world.. but you will mostly find crime related news from middle east or muslim world.. like "one raped women is going to marry rapist..". In use in evrey 2 minute one rape happen God dammit. Child abuse is very common..
    Have you seen news about protests like wall street occupy protests? Do you expect the same level of coverage if it was happening in Iran? or somewhere in Muslim country? Western media is just propganda machine.. and you people are brainwashed zumbies... sorry if it hurts... but its truth

    November 24, 2011 at 11:02 am |
  9. Alf

    @Asif: nice to meet someone from the 50-cent party

    November 24, 2011 at 11:13 am |
  10. Zed

    The advantage China had before was always its incredibly large manpower pool. US and European companies jumped at the chance to profit from a country whos' peoples found a dollar a day nearly as large as a fortune.

    Now that workers demand Americanish-standards and higher pay, companies are now jumping back into Europe and the US. The political situation of China, which is incredibly fragile despite the iron facade, does seem to help convince companies that a country that frequently bans free speech and opposition (reciprocating in national protests) is not really worth the risk.

    November 24, 2011 at 12:36 pm |
  11. jesus

    @zed...so china labour has been exploited like africans was in the last century with slavery

    November 24, 2011 at 12:59 pm |
  12. steve802

    the heading of this report is most misleading. where's the stalling?

    November 24, 2011 at 1:15 pm |
  13. steve802

    oh my jesus! your comment makes you a country pumpkin living in the middle ages, kind of jurassic. can't help but need to ask whether you been to china during past last 20 years? cos if you did, you would't compare china with africa. ignorant country pumpkin trying to be smart.

    November 24, 2011 at 1:21 pm |
  14. Saoirse

    For those expats up above...there are a lot more reason to be worried about then either of you mentioned. Also you cannot use on city in China as an example of what will happen to China as a whole. If you want to see some of the up an coming issues you need to research the cities of Cheng Du and Wuhan. This is not all there are growing problems in provinces like Liaoning. However, it is a very difficult subject to completely talk about in one article...This one is mainly focusing on exports. The main problem is greed. Get rich quick...is a common thing in China....very little standards for quality and continued consumer support. Many of the rich are not willing to stay long enough to help develop the economy in a way that is sustainable. There is very little innovation in the overall market, most ideas being copied and reproduced over and over, with rampant IP infringement. It is opposite of the US which has been stifling innovation through large monopolistic companies. I could go on and on...but CNN does not pay me...so I will end here. :P

    November 24, 2011 at 2:46 pm |
  15. Kyle H. Davis

    Asif: If that is the case... go take a look at any Chinese news source and count the number of headlines about the US. There is no comparison. Granted, there are several headlines about Chine today... but take a week, count the number of headlines about China, count the number of NEW headlines about China, count the number of NEGATIVE headlines about China... then go do the same thing with Xinhua, People's Daily, China Daily, Global Times... you will be astonished.

    November 24, 2011 at 4:52 pm |
  16. Ruth in Ohio

    All Americans have to do is stop buying anything made in china for 6 months ,that will bring them to there knees.....they need US....try it people!!!!

    November 25, 2011 at 1:21 am |
  17. Andy

    Maybe people are getting sick of their crap products. Just a thought.

    November 25, 2011 at 8:08 am |
  18. R William Holmes

    My friends in China are optimistic about the countries capacity to produce. They are worried about the West and the European Unions ability to buy. Exports will see a decrease over the next few years and may be exacerbated by the US dollars demise as the worlds reserve currency.

    November 25, 2011 at 11:30 am |
  19. goggi

    Ruth in Ohio
    All Americans have to do is stop buying anything made in china for 6 months ,that will bring them to there knees.............BEFORE YOU STOP BUYING CHINESE PRODUCTS, FIRST START THROWING OUT THE CHINESE PRODUCTS FROM YOUR HOMES, THAT WILL SURELY BRING YOU AMERICANS TO THE KNEES goooossshhh

    November 27, 2011 at 7:14 am |
  20. Suku

    Ruth in Ohio
    Dont let your emotions cloud the reality. The reality is that, today Americans need China for even mundane products – even toilet paper; because manufacturing in the USA has regressed or totally stopped. So if China stopped exporting to the USA, you Americans would literally stink! Take a look around you, your economy is diseased and barely surviving. You are therefore hardly in a position to be commenting on the hands that actually feed you. Get out of the jingoism and flag-waving and accept reality for what it is.

    November 27, 2011 at 4:17 pm |
  21. SLP

    fhgjhgnmfh

    November 28, 2011 at 5:43 am |
  22. S

    Fewer exports = good news. I don't need their T-paper. I don't want any of their food. I pretty much have quit buying anything made in China therefore I don't buy much of anything anymore. I will do without first. Anybody that consumes the poison and toxins they sell you are kra-Z. Oh yes...this is the USA the home of the lazy and Stu-pid.

    November 29, 2011 at 2:52 pm |
  23. Serigo Lopez Meza

    honest here in USA are so Lazy Crap... i never buy anything USA is so Crap... i have seen USA some kind of Junk.... all people need stop worry about USA and Stop Compains.... i alway buy CHina still good for last long.. Cause China is try make up long work are so busy.... MAunfacting sometimes can be Overheating.. mean too hot... USA not made anymore they Moved CHINA!! because USA is need be safe is was lugs can be burn have commiocal.... all people need Stop act be Baby Complians.....

    December 6, 2011 at 6:22 am |

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