Tuesday, September 4th 2012 - 00:20 UTC

Growing fears China is slowing down faster than estimated

China's manufacturing activity fell to a nine-month low in August, adding to fears that its economy is slowing faster than estimated. The official Purchasing Managers' Index (PMI) fell to 49.2, the lowest reading since November 2011, data released over the weekend showed.

China's central bank has lowered the amount of money banks must keep in their reserves

PMI is a key gauge of manufacturing activity and a reading below 50 shows contraction. Analysts said China was being hurt by a slowdown in global and domestic demand.

“China's manufacturing sector continues to struggle, weighed down by a significant domestic slowdown, a wholly unsupportive external climate and a completely insufficient policy response,” Alistair Thornton of IHS Global Insight said in a note after the data was released.

China's economy saw robust growth in the past few years, boosted in part by record lending by Chinese banks. However, the credit boom resulted in a surge in property prices leading to fears over asset bubbles and concerns over whether credit-fuelled growth was sustainable in the long run.

That prompted policymakers to introduce various measures to curb lending. Analysts said that while the moves had helped to keep asset prices in check, they had impacted the country's economic growth.

China's economy grew at an annual rate of 7.6% in the second quarter, the slowest pace of growth in three years. Prompted by fears of a sharp slowdown in the economy, China has taken some measures to ease its policies in a bid to spur growth.

China's central bank, the People's Bank of China has lowered the amount of money banks must keep in their reserves, thrice in the past few months, in a bid to boost lending in the country.

It has also cut interest rates twice since June this year, to bring down the cost of borrowing for businesses and consumers. However, those measures seem to have had little impact on growth.

Analysts said this was because Chinese banks were not too keen to lend money, not least due to fears over slowing growth.

“Past experience has taught us that a bad loan crisis usually came three years after a period of abnormal credit surge,” Wei Guoxiong, chief risk management official with the Industrial and Commercial Bank of China was quoted as saying by the Xinhua news agency.

“There will be a notable rise in bad loans in the banking sector this year”.

11 comments Feed

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1 British_Kirchnerist (#) Sep 04th, 2012 - 12:35 am Report abuse
China's long term economic prospects are still better than America's
2 JoseAngeldeMonterrey (#) Sep 04th, 2012 - 01:36 am Report abuse

Wrong by all accounts. China faces a demographic bomb in ten years when hundreds of million of chinese will begin to retire without pension funds and medical services enough to cover even ten percent of them. China will grow old before they get rich.
3 BLACK CAT (#) Sep 04th, 2012 - 03:24 am Report abuse
Psssssssssssssssssssssssssssssssssst your welfare cheques are starting to dry up
4 Captain Poppy (#) Sep 04th, 2012 - 01:43 pm Report abuse
Once again BK you fail in economics. China's propersity is tied to seeling to the USA and EU. As China slips, what do you think happens to south american exports to China?
It's in Macro Economics 101B
5 ChrisR (#) Sep 04th, 2012 - 03:19 pm Report abuse
@4 Captain Poppy

But the Argie troll Blind_Scottie_Kirchnerist cannot bring himself EVER to criticize his commie mates even when anybody with half-a-brain can see the facts for themselves.

The Chin have fallen into the usual trap, just like Brasil, in thinking everything will keep expanding and the People of the Middle Kingdom will conquer the world.

Now they are finding out it is not that simple, just like Brasil.
6 yankeeboy (#) Sep 04th, 2012 - 05:57 pm Report abuse
Brazil is on yet another stimulus program not sure why since all the others failed but leftys think you can print and borrow your way to prosperity for some reason.
Chins is a huge problem for the world though. Their economy is horrific and if they fall much further they are going to have huge widespread riots. In the end it is good for the USA so let's see what happens in the next year or so.
7 Captain Poppy (#) Sep 04th, 2012 - 06:22 pm Report abuse
I agree Yankee that if China continues to fall, that's good for the USA. I don't think that the CCP can handle or deal adequately with failure other than factional infighting. The economic climb that they've experienced do to some economic reforms is meaningless in the longrun with political reform. I think Chnia is in for an extended decline. The biggest indicators are the all the businesses that have flocked there are now leaving due to rising costs and fixed pricing. Businesses are constantly complaining of low quality, too much travel, communications problems, shipping delays, rising costs. American businesses are returning the the USA and other relocating to Malasia.
And as others may hate it....what's good for the USA winds up being good for the world. Like it or believe it or not, the USA has the worlds largest market with the worlds largest disposble income in the world.
8 brucey-babe (#) Sep 04th, 2012 - 08:28 pm Report abuse
No wonder they`re on the decline with all that crap they keep pumping out, I`ve never known such rubbish. If their ships are to the same standard the world has nothing to fear. ( They can`t even get a take-away right !)
9 Yuleno (#) Sep 04th, 2012 - 09:31 pm Report abuse
Brilliant deep thinking gone into some comments on this article.I'm astounded to read such precise appraisals of a global downturn.I'm sure that the gurus will get us all out of this sooner or later and in time for china to be well placed to replace traditional producers and to increase the west's dependence on what the Chinese produce.
What might happen is that,discontent grows.Opposition groups form,get weapons from the USA,as happened in Libya.Usa buys more from Europe.China exports labour intensive products to pay for the arms they owe for and yankeeboy and poppy say 'told you RG's so'
Erm what can I say now .
10 ChrisR (#) Sep 04th, 2012 - 09:40 pm Report abuse
9 Yuleno

If I were you, and as an atheist 'thank God I am not' I would shut up while you are behind.
11 Captain Poppy (#) Sep 05th, 2012 - 12:42 am Report abuse
Yuleno....your style is changing.......did your writers go from dram to comedy? If you're allowed to read anything from outside of argentina as we know books and reading material can't be imported, you would know that businesses are leaving China.....period! And that's a fact. I understand as a fellow communist that is alarming being they are south america's tit to feed on for survival.

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