Author Topic: Fire dies under China’s once booming manufacturing industry  (Read 1324 times)

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Offline bijou

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China’s vast manufacturing sector, the driving force behind the country’s celebrated economic growth story, is on the brink of technical recession as order books run dry and once humming factories fall silent.

The bleak snapshot of business conditions, which may herald yet more shrinkage in China’s growth prospects this year, arrived yesterday via the manufacturing purchasing managers’ index (PMI), a survey produced by CLSA, the Hong Kong brokerage.

Widely scrutinised by markets, the monthly report is considered by many investors to be one of the most useful leading indicators for the Chinese economy. Over the past 12 weeks it has painted a far more rapidly worsening picture than anyone predicted and now highlights China’s unexpectedly high vulnerability to the global financial crisis.

Eric Fishwick, CLSA’s chief economist, who compiled the PMI report, said that China’s manufacturing activity was very weak last month. “Output contracted at a record pace, employment fell for the fifth month and work in hand declined.” he said. “With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43 per cent of the Chinese economy, is close to technical recession.”

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I think that a large part of their problem is the well publicised quality control issue. The melamine in milk scandal can only have driven demand even lower.