China’s economy is supported by exports, and the recent slowdown in the global economy has frozen their investments and exchange traded funds (ETFs).
The factory orders are at the lowest levels seen since the government began measuring them, causing a chain reaction of laid off workers and the need for a massive stimulus package. Most of China’s customers are overseas, such as in the United States, and many economies are cutting exports, leaving China’s exports with no place to go.
Scott Tong on Marketplace reports that the economic stability in China goes along with social stability and officials and leaders are looking at protests and angry laid-off factory workers smashing windows and overturning police cars.
So far, Beijing has responded by pledging subsidies to rural resident and slashing interest rates. The government has responded elsewhere by removing price controls on items such as grains, oil and meat, reports Terence Poon for The Wall Street Journal.
The shift has gone from inflation toward growth, and Beijing is leading the way. If these pro-growth policies stick, perhaps China will get the kick it needs to keep moving forward.
The China Federation of Logistics and Purchasing said Monday its Purchasing Managers Index for China fell to the lowest level since the index started in 2005, with November PMI at 38.8. A reading above 50 means expansion and a reading below 50 means contraction for the economy.
A slowdown in the domestic property market is also hurting China’s growth, and Chinese manufacturing is the most threatened, as cuts in production equal cuts in employment.
- iShares FTSE/Xinhua China 25 Index (FXI), down 60.3% year-to-date
- PowerShares Golden Dragon Halter USX China (PGJ), down 69.2% year-to-date