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China's Global Slump Draws Closer

Jeffrey Snider profile picture
Jeffrey Snider

By the time things got really bad, China's economy had already been slowing for a long time. The currency spun out of control in August 2015, and then by November, the Chinese central bank was in desperation mode. The PBOC had begun to peg SHIBOR because, despite so much monetary "stimulus" in rate cuts and a lower RRR, banks were hoarding RMB liquidity.

Late 2015 was not a fun time in China. The idea of economic rebalancing had been introduced years before largely to try and suggest the permanent industrial/manufacturing slowdown was a choice. It wasn't. In the middle of 2014, the service/consumer economy started weakening, too.

According to China's National Bureau of Statistics (NBS), the country's official Non-manufacturing Purchasing Managers Index stood at 55.5 in May 2014. That wasn't all that robust to begin with, a number more like 58 would have been consistent with what China was supposed to produce in every economic sector.

By those darkening days toward the end of 2015, however, rather than jump to rescue the Chinese economy (and therefore the global economy), the Non-manufacturing PMI had dropped to 53.1. And it wasn't an outlier, either, a low level consistent with so many other alarming statistics indicating an immense, uniform global drag.

The NBS reported last week that the same service sector PMI in November 2018 fell to 53.4, or nearly the same as three Novembers before. It was the lowest level since before Reflation #3 really got going in later 2016. China's economy isn't crashing, but it is certainly staring into the face of another downturn, the rolling over part of the process nearly complete.

The Manufacturing PMI was right at 50.0 in November, also the lowest in several years. Sitting on the so-called divide between growth and contraction, it's never so neat and clean, the direction

This article was written by

Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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