China Output At 18-Month Low: Epi-Center of Global Credit Bubble Cracking

The HSBC Flash China Manufacturing PMI shows Output Contracts at Quickest Pace in 18 Months. The overall PMI index, new orders, and production were all lower.

Key points

  • Flash China Manufacturing PMI™ at 48.1 in March (48.5 in February). Eight-month low.
  • Flash China Manufacturing Output Index at 47.3 in March (48.8 in February). Eighteen-month low.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co – Head of Asian Economic Research at HSBC said: “The HSBC Flash China Manufacturing PMI reading for March suggests that China’s growth momentum continued to slow down. Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower.

In the face of an explosion of credit, still growing imbalances, malinvestments, property and other bubbles, it is a mystery why anyone expects China to make efforts to “stabilize growth”.

To stabilize growth implies more bad loans and more SOE malinvestment. Given China’s massive housing vacancies, support for still more housing is ridiculous.

More malinvestment is possible of course, but the longer China attempts to keep the credit party going, the worse the ultimate implosion.

Mike “Mish” Shedlock