Slowdown in Chinese manufacturing fuels global fears – by Andy Hoffman (Globe and Mail – November 24, 2011)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

China’s massive manufacturing sector is slowing, raising fears of a hard landing for the Asian economic superpower that would deliver a devastating blow to a struggling global economy.

Confirming concerns that Europe’s sovereign debt crisis is crimping demand for Chinese exports, a key measure of China’s manufacturing activity has slipped to its lowest level since March, 2009.

The HSBC China Manufacturing Purchasing Managers’ Index fell to a reading of 48 in November, down from 51 in October. A reading below 50 indicates contraction.

“The drop suggests that the economy has taken a turn for the worse after a few months in which conditions seemed stable,” Mark Williams and Qinwei Wang of London’s Capital Economics said in a report.

The health of China’s manufacturing- and investment-driven economy, the world’s second-largest, is acutely important. Strong growth in China has been a prime driver of a recovery from the global financial crisis. China enjoyed GDP growth of more than 10 per cent in 2010 and the World Bank is forecasting 9.1-per-cent growth this year.

China’s policy makers, who have been preoccupied with containing persistently high inflation and raised borrowing rates and bank reserve requirements, are now expected to shift toward monetary easing in light of the slowdown.

The Chinese economy has flown into “a stormy zone,” said Na Liu, the founder of CNC Asset Management Ltd. and an adviser on Chinese issues to Scotia Capital.

Last week, home sales in the top 10 cities in China fell 38 per cent compared to the same period last year, and average home prices in China’s 70 largest cities ticked lower for the first time this year. A weakening property market would diminish investment activity and demand for raw materials.

For the rest of this article, please go to the Globe and Mail website: