By Jan van Eck via Iris.xyz.
CEO Jan van Eck and Economist Natalia Gurushina discuss the state of China’s economy and highlight two key charts for understanding where it is in its growth cycle.
China has been a major contributor to global growth, and its economic activity tends to have significant repercussions for the global economy. To understand where the Chinese economy is in its growth cycle, the two charts below are perhaps the only charts one needs.
Purchasing managers’ indices (PMIs)1 are a better indicator of the health of the Chinese economy than the gross domestic product (GDP) number, which is politicized and is a composite in any case. The manufacturing and non-manufacturing, or service, PMIs have been separated in order to understand the different sectors of the economy. These days, the manufacturing PMI is the number to watch for cyclicality. The non-manufacturing PMI shows a strong rate of expansion, which one would expect with the emergence of the “new China” economy—one that is increasingly driven by consumption. However, the manufacturing PMI shows two falls below the important 50 mark into contraction territory—showing the “recession” in late 2018 and a recovery after Q1 2019.
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