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Chinese
economy poised to sink below 2008 depths
Proverbial
history repeats itself is true depiction of economic status in China.
If 2008 nightmare faded from our memory the Chinese theatre is
reliving. Remarkably China had demonstrated uncanny resilience in
2008 and 2009 making a blistering recovery propped by timely stimulus
package.
25
August, 2012
4
years hence recessionary morass has come back with a vengeance
crippling growth and demand bulk of the globe and clouding the gleam
of BRICS nations. China had been at the vanguard of global recovery
single handedly turning the tide around with its insatiable appetite
for goods and services fuelling nearly double digit growth.
Since
the past 1 year the sprint has been impeded by deepening economic
crisis in EU and USA two important trading partners. Ensuing backlash
has left Chinese industry mauled with burdensome inventory and
sluggish demand.
Preponderance of austerity in monetary policy to
keep inflation reined has taken toll of growth. Reality sector has
been the main drivers of demand and growth in China is in tatters
with residual transactions as the credit strapped industry gasps for
sustenance.
Trickle
of recent economic indicators reflects the depths economic slowdown
even before the year draws to a close. August HSBC Flash China
manufacturing purchasing managers index (PMI) fell to 47.8 in August,
lowest level since November 2011, from 49.5 in July.
Export
orders sub-index at 44.7 - the worst showing since March 2009 -
provides bearish reading. Sharp drop in official producer price index
in July, which marked the fifth straight month of price deflation
showing a sub-index measuring factory input prices at its lowest
level since March 2009.
HSBC
PMI has been below 50 for 10 straight months, reinforcing calls from
investors for measures to support economic growth. Splurge on
infrastructure and budget housing propped by reduction in lending
rates would be a boon at this juncture.
Government
is yet to shed caution on credit indulgence lest it fuels inflation
in the final year of change of guard.
Unemployment
is another major concern with the HSBC's flash employment sub-index
remaining unchanged from June, when it had registered its lowest
level since March 2009, the point at which China began to pull out of
the trough of the global financial crisis.
Nonetheless
government has taken China has been "fine tuning" policies
to keep growth on track without releasing curbs on the property
sector. Instead, Beijing has fast-tracked fiscal spending on key
projects, cut the amount of cash banks must keep as reserves to free
an estimated CNY 1.2 trillion for lending by end July. In the last
one week alone People's Bank of China (PBOC) injected a net CNY 278
billion in the inter bank money market.
In
the twilight of 2012 when the demand recedes owing to slump in
economic activity government would go full hog to kindle last burst
of economic activity to accomplish yearly targets and glorify the
political transition. Turn of events in EU and other economic havens
would be pivotal for any endeavor towards economic emancipation .
Other
stories about China:
"China's
illicit internet economy is growing at such a rate it will
inevitably have a hugely adverse impact on the country's
entire economy."
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