Chinese economy is slowing down

Posted August 11, 2008

Chinese economic growth i expected to slow to just 8 percent in 2009. That spells problems for job creation and profit margins.

by Frederik Balfour, Der Spiegel

Baltimore — (TFN): In a worrisome sign that China’s growth streak is losing more steam, the latest official statistics on manufacturing show the output of Chinese factories may have actually contracted in July. The Purchasing Managers Index fell to 48.4 in July, the first time it has dropped below the 50 boom-bust line since the government introduced the measure three years ago.

That fall suggests manufacturing is shrinking, as levels of both new orders and production fell month over month. “China’s manufacturing sector is facing tough challenges due to the slowdown in the global economy, rising production costs, tight credit conditions, power shortages, and currency appreciation,” Lehman Brothers economists wrote in a recent research note. (…)

Corporate profits during the first five months dropped by half, from 42 percent in 2007 to 21 percent this year, and if anything could drop more. China’s CSI 300 index is about 60 percent off its highs of last October.

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