The latest “flash” reading on the health of the Chinese factory sector shows that far from saving the world, Beijing may be wrestling with trouble of its own.
According to the preliminary HSBC survey of Chinese manufacturers, industrial activity in the country declined once again in September.
The “flash” PMI number came in at 49.4, well below several crucial targets: the 49.9 reading from August, the whisper number of 52 and the “neutral” 50-point level between industrial expansion and decline.
In short, this is a big disappointment. The last time Chinese factory activity cooled for an extended period was during the 2008-9 disaster, and this bodes poorly for the official PMI due out on Sept. 30.
Economists are divided as to whether this means China is due for a hard landing or simply a rough patch, but what is clear is that Beijing is not willing to rev up its factories simply to bail the world out of its current malaise.
China’s economic leaders seem content with the current rate of activity, especially if it means keeping inflationary pressures under control.
There is always the possibility that the hard landing is already at hand. There is some talk of problems brewing in Chinese real estate.
Even just the prospect of difficulties for real estate has the markets on edge.
If real estate is in trouble, we will see it reflected in funds like TAO (quote). Otherwise, any slowdown in manufacturing is already playing out in the industrial-heavy FXI (quote) — the question is how well the Chinese consumer, as reflected by funds like CHIQ (quote), is holding up.