March 23rd, 2012
01:12 AM GMT
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Hong Kong (CNN) – Investors have even more proof that China’s economy is slowing down.

The country’s manufacturing sector shrank for a fifth month in a row, according to HSBC’s latest China PMI survey Wednesday. That follows news of weaker industrial output from January to February.

This news shows that Beijing’s policies to slow down the economy are in fact working. But Premier Wen Jiabao – who’s been the champion of those measures – may now be asking whether they’re working a bit too well.

HSBC’s China Flash PMI came in at 48.1 point for March. Anything under 50 means a contraction.  The worrying thing is that this manufacturing index has been under that 50-point mark since November. Not only that, March’s reading is the lowest in four months.

So why this continued contraction?

For one, domestic demand is still weak. Companies in the country just aren’t placing new orders fast enough to grow the manufacturing sector.

Chinese manufacturing weakens again

The same goes for overseas demand, in particular from the West. A good part of that blame lies in Europe, China’s biggest trading partner. HSBC forecasts that Chinese exports to Europe will contract 1% this year.

But Frederic Neumann told World Business Today that China watchers have nothing to fear. Neumann is HSBC’s Managing Director and Co-Head of Asian Economic Research.

“This number is actually still consistent with growth around 8% so we would have to see much worse numbers for us to believe that this is a crash of some sort,” Neumann said.

“By most interpretations this is an intended slowdown by the government which had tight monetary policy last year and is deliberately trying to deflate the property sector. And these are the kinds of results you then get. But I think it’s far too early to talk about a crash in China."

China hits rough patch, but landing looks soft

And it’s not just HSBC that’s maintaining its forecast of a “soft” landing for the country. French bank Credit Agricole said the same in a research note out today.

However, both banks are predicting some form of new monetary easing in the next half year – if not earlier – in the form of an interest rate cut or a cut to the capital reserves that China’s banks are required to hold.

soundoff (35 Responses)
  1. whosurdaddy

    Stupid CNN China slowdown because the Chinese new year shoping season is over very much like retail slow down after christmas its all seasonal.

    March 23, 2012 at 2:28 am |
  2. Mak

    China won't be a superpower! We won't let it!

    March 23, 2012 at 2:32 am |
  3. Thomas

    China has to slow down, because there's not enough resource. Chinese people don't have enough gas to run their cars.

    March 23, 2012 at 2:51 am |
  4. CCCP

    I don't believe it. I'm dumping all my China stock. This is rubbish. Fake power only able to copy. Anyone can copy even Africa or Russia! Not impressed!

    March 23, 2012 at 3:08 am |
  5. whosurdaddy

    LOL @ CCCP i doubt you have any China stocks at all.

    March 23, 2012 at 3:18 am |

    lol, at least we can now have good product to buy for ourselfs, tired of their fake.

    March 23, 2012 at 3:24 am |
  7. HSBC

    Could HSBC hold on for a moment? March of 2012 is not over yet.

    March 23, 2012 at 3:31 am |
  8. Kyle H. Davis

    "The country’s manufacturing sector shrank for a fifth month in a row"... "...shows that Beijing’s policies to slow down the economy are in fact working." – WOW! Someone has been drinking the Kool-Ade.

    So, it has nothing to do with the world economic crisis and the fact that other nations running quickly to find new trading partners? It has nothing to do with China's own domestic economy faltering along with its imminent housing crash?

    Or are we seriously to consider that the recent trade deficits were created purposefully through the ingenuity of Chinese government economic actions?

    While I respect the fact that Ramy Inocencia seems to have posted this from Hong Kong... the mainland is a monster of a different color.

    And as for banks predictions – Once you realize the massive amount of foreign loans that banks have given, in an attempt to cash in on China's growth, it's not hard to see them giving you a "rainbows and unicorns" version of the economic future of China.

    March 23, 2012 at 4:19 am |
  9. james sturart

    China. China. What have you done?
    Dont you have any heart??????????????
    They are not Chinese, YOu know????????????????
    They are Tibetans.

    March 23, 2012 at 4:33 am |
  10. CCCP

    I am dumping all China stock. I am saving one to swab my bunghole with.

    March 23, 2012 at 4:46 am |
  11. F Robinson

    In Maoist thought, a capitalist roader is a person or group who demonstrates a marked tendency to bow to pressure from Bourgeois forces and subsequently attempts to pull the Revolution in a capitalist direction.

    March 23, 2012 at 4:55 am |
  12. opAZ

    what was it that suggest crash is imminent?

    March 23, 2012 at 5:15 am |
  13. Layne

    "Neumann is HSBC’s Managing Director and Co-Head of Asian Economic Research." Isn't what he has to say a little like listening to NAR in the US, cheerleading the real estate market there in 2006? In a China crash, HSBC would be hurt very badly.

    March 23, 2012 at 5:32 am |
  14. CP

    I think the Chinese know much clearer than you, they are Chinese. Of course we have hearts. We all want to lead a peaceful life. And how about you? I doubt you have eyes. Have you been in any area of China?

    March 23, 2012 at 6:31 am |
  15. Sahr

    The Chinese have to look ahead the way they are going is too fast, they want to rich at a pick were others took years to be. So am afraid they will have to fall down so quick, coping from others, making fake products too bad for them. For us here in Africa all Chinese products coming here is full of fake not guarantee.

    March 23, 2012 at 7:36 am |
  16. jake samuel

    chinese people, the best thing you can do is go give Tibet back to Tibetans. I think this is getting too much. Really that is not you country, you may have invaded it, but it is not really yours China. Come on, grow a heart.

    March 23, 2012 at 8:55 am |
  17. desadiste

    Right on schedule, the first to comment is another paid Chinese govt shill, this time "Whosurdaddy" is the "50center".
    Got sad news for you but China is nobody's "daddy" but YOURS, slave-boy. Daddy won't even allow you to express your opinion in an election.
    We were laughing at you when you were carrying pictures of Chairman Mao and we are laughing at you now for loaning us money that will be repaid in worthless paper. So, who's the fool trying to buy a marketplace because you don't have one at home?

    March 23, 2012 at 9:54 am |
  18. whosurdaddy

    @ Jake Samuel move all your white trash and Niiggers back to where you from and give America back to the Native please, grow a heart.

    March 23, 2012 at 9:56 am |
  19. desadiste

    whosurdaddy is projecting.
    But, since they aren't allowed to teach psychology in Chinese schools, he has no idea what this even means.

    March 23, 2012 at 10:21 am |
  20. laoafei

    Some people have been waiting for the collapse of China, for like 20+ years? According to some 'clever' predictions, China should 've already crashed. However the actual result is always disappointing. Yet people are still producing new predictions about China's economic crash every day. I guess they think they are in a lottery game that after all there will be a winner anyway, no matter how long it takes.

    March 23, 2012 at 2:44 pm |
  21. whosurdaddy

    LOL @ desadiste I take that you never been in school at all.

    March 23, 2012 at 2:49 pm |
  22. TingTong Ling

    Me ruv u rong timey - no lecession only election

    March 23, 2012 at 4:21 pm |
  23. TingTong Ling

    Rets Make Rove not Wal

    March 23, 2012 at 4:25 pm |
  24. Sowhat

    Ummmm....on CNN, there's at least 20 articles on China's "hard landing," "crash," however you want to spin it....mind telling me who your fortune teller is...cause he/she should be fired by now, right?

    March 23, 2012 at 5:14 pm |
  25. Aristocles

    Truth is, the Chinese would never want to slow down exports or manufacturing. What the Chinese government wanted to slow down was over investment in housing and unneeded infrastructure, as China cannot afford to maintain yet another bridge to nowhere at the same time they have countless millions of unsold, empty condos.

    Instead, we have seen a combination of inflation forcing a rise in Chinese wages making their labor less cheap and a fall in the purchasing power of their domestic and foreign markets. This has led to 5 months of contractions in their manufacturing sector. 5 months. That's a lot longer than the Chinese New Year can explain.

    March 23, 2012 at 7:20 pm |
  26. David Miller

    Tibet is in the hands of Tibetan people, and it will never fall into the hands of those exiled slave masters again. Not in another million years. Your weekly murderous "torch a follower" campaign haven't got you anywhre, have it?

    March 24, 2012 at 2:06 am |
  27. sameh

    View out the fetus during birth

    March 24, 2012 at 2:25 am |
  28. Megaton

    All I can say is that china would not slow down for making fake products

    March 24, 2012 at 8:33 am |
  29. long


    March 25, 2012 at 3:18 am |
  30. China

    if the American would like to go back to their hometown in Eruope, and give the land the the indian,i, as a Chinese, would like to give the tibet to tibetian without any additional requirement. or, shut up , all American pigs!

    March 25, 2012 at 6:13 am |
  31. sameh

    dying lion Very influential position

    March 25, 2012 at 8:16 am |
  32. chinamade

    people would buy anymore Chinese products very inferior quality...oppressing people...down China down!

    March 26, 2012 at 11:45 am |
  33. alphonce aboge

    china is reaping my homeland kenya

    April 10, 2012 at 8:31 am |
  34. icons set

    P.S. Please review Remove Icon from jpeger

    September 20, 2012 at 3:17 pm |
  35. icon pack

    In my opinion you are not right. I can prove it.

    October 9, 2012 at 2:57 pm |

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