China’s economy suffers a severe dose of shrivelitis
Experts see Beijing as being ‘caught between weak demand, a real estate crisis and high-tech successes’
China is suffering a severe dose of shrivelitis. Amid a spluttering economy, factory activity shrank for a sixth straight month in September, the National Bureau of Statistics reported today. It is now in the longest slump since 2019.
Even though the official manufacturing purchasing managers index, or PMI, edged higher to 49.8 from 49.4 in August, it stayed in negative territory. And it was still below the 50-cutoff level between contraction and expansion.
“Overcapacity remains a problem [while declining prices are] suggesting deflationary pressures remain entrenched,” Zichun Huang, the China economist at Capital Economics, said as reported by the Reuters news agency.
The only hint of good news came from the latest figures in a private survey, which included export-oriented private companies. Compiled by S&P Global, the RatingDog General PMI jumped to 51.2, up from 50.5 in August.
“Overall, September’s PMI improvement was more broad-based. While output prices and employment continued to decline, other major sub-indices posted in expansion territory,” Yao Yu, the founder at RatingDog, pointed out.
Some see China as an alternative model to the West.
China Business Spotlight
Behind the numbers:
- Still, deflation is a major problem, as stagnant wages squeeze domestic spending after the property meltdown in 2020.
- The broader economy has also been infected by overinvestment, overcapacity and overproduction.
Delve deeper: “The question is not just a matter of numbers. Official data from Beijing paints a picture of stability and progress. Behind this lies not only state propaganda, but also a double dose of wishful thinking,” China Business Spotlight stressed.
Between the lines: “Some see China as an alternative model to the West, while others hope that this model will fail. It is difficult to take a sober view between these two extremes,” the Substack newsletter reported at the weekend.
Big picture: Yet, it went even further, revealing how economists see the country as being “caught between weak demand, a real estate crisis, and high-tech successes.” Indeed, “assessments range from impending recession to cautious optimism.”
China Factor comment: Thrown into that mix is US President Donald Trump’s tariff wars, which have upended the global trade system. “Risks of a prolonged period of stagnation” also hang over the world’s second-largest economy.