Investing
China's On Fire As Factory Production Rises Again
Published:
Last Updated:
The recession and unemployment across the world must have been cured. How else could China’s factories push out more and more products every month as concerns about its economy overheating grow?
China’s purchasing managers’ index rose to 55.1 in March from 52.0 in February, the government said. Reuters reports that the “HSBC/Markit survey rose to 57.0, the third-highest level in the six-year history of the survey, from 55.8 in February.”
Even the world’s most gifted economists cannot figure where all the manufactured goods are going. There are really only three options. The first is that the consumer buying power in China is growing at rates that are both unprecedented and unexpected. The reason that could be true is that factory production improves manufacturing employment, which in turn builds the Chinese middle class. But, since China’s manufacturing renaissance is relatively new, it is unlikely that so many people suddenly became employed in well-paid jobs.
China’s $585 billion stimulus package may have done its work in ways that were unexpected. Consumer borrowing may have lifted off even if employment did not. That means that Chinese consumer is following the American consumer down that path of leverage. The end point of that path is known all too well in the US where the rapid deceleration in consumer spending cost American at least two years of GDP growth.
China could be manufacturing goods at such a rapid rate because its trade partners are doing extraordinary well. The evidence of that is not showing in the GDPs of the US, Japan, UK, and most EU nations. U.S. GDP jumped in the fourth quarter of last year as companies restocked inventories, but that improvement is temporary.
China may be in the process of sending goods abroad which it has made at below-market prices and sold at below-market prices. That would add to concerns about the value of the yuan and may make the showdown between the US and the People’s Republic more contentious than expected.
Under almost any circumstance, Chinese growth, on fire again, cannot continue for too long.
Douglas A. McIntyre
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.