China's manufacturing CONTRACTS

From bloomberg:

China's manufacturing contracted as the worst financial crisis since the Great Depression eroded export demand.

The Purchasing Managers' Index fell to a seasonally adjusted 44.6 last month from 51.2 in September, the China Federation of Logistics and Purchasing said today in an e-mailed statement. That was the lowest since the gauge was launched in July 2005. A reading below 50 reflects a contraction, above 50 an expansion.

Note: This is not a slowdown from 10% growth to 9% growth. This is outright contraction.

Fortunately for China, they have over $1 Trillion accumulated from the US trade surplus that can be spent on an internal Keynesian stimulus program.

The US, not so much.

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Manufacturing purportedly

Manufacturing purportedly accounts for over 40% of the Chinese GDP.

With manufacturing contracting for the third month in a row, how does China still grow at 9%.....

In the past, manufacturing has grown at 15-16% to result in such a high growth rate.

As it is, there are serious doubts over the veracity of Chinese claims regarding agricultural growth rates. Plus..
usually, a sustained decline in manufacturing also leads to a somewhat proportional decline in services since transportation, logistics, business travel and entertainment also decline somewhat.

So how does one justify the current growth claims of the Chinese govt?

Who can still believe such rosy projections for the Chinese economy?????


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China statistics

We sure don't believe our statistics so could China be manipulating their numbers like everything else? Well, I'll place bets they are not purely objective.

Their stat has only been published since 2005 when by that time China had already captured, through offshore outsourcing so much manufacturing so what does this contraction really mean in this case?

If they had statistics from 1973 or even 1999, right before the China PNTR it might be more useful I think.

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If the Chinese economy is contracting

and the factory closures in the pearl River Delta suggest that this is the case, then a bitter wind is going to be blowing on in.

Economic growth has been the way in which the Chinese government legitimates itself to its public, and an economic contraction like this calls that into question.

The government has already initiated Keynesian measures like spending on infrastructure, but the question is whether this will be enough.

Westerners see what's going on in China as a matter of economic stability, but more importantly, it's a matter of political stability.

If the Chinese government can't legitimate itself with economic growth, then it's going to be forced to turned to nationalism.

And that nationalism is going to be aimed at the US.

Aren't you glad that we gave them the industrial base that will allow them to arm themselves to the teeth with weapons that are a near match for out own?

And don't forget about China's four secret aircraft carriers. The ones bought from Russia and the Ukraine during the 1990s to be "amusement parks" in Shanghai and Guangdong province.

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