Chinese Manufacturing Is Teetering

Chinese manufacturing disappointed again in November. The country’s manufacturing PMI missed expectations coming in at 50.3, analysts expected 50.5.

Any number under 50 indicates a contraction in the country’s manufacturing sector.

HSBC’s Chinese manufacturing PMI held steady at October’s number — 50.0, right at the break even point.

This continues a worrisome trend for the country. In October manufacturing PMI came in at 50.8 — analysts expected 51.1.

Up until a few weeks ago it seemed like President Xi’s administration was ready to watch the economy slow down — they even seemed ok with watching 2014 GDP miss its 7.5% target rate.

State media reported that anyone in support of a PBOC rate cut was not a patriot.

Then the PBOC “cut” rates earlier this month. It wasn’t a real cut — basically, it dropped the floor for key interest rates, but maintained the ceiling, so banks can still charge the same rate if they want to. The “cut” was less a cut, and more an indication that more action may be coming more than anything else, and the markets loved it.

Numbers like this PMI miss, however, could upset markets again. A head fake is not enough to cure what ails the Chinese economy — a corporate sector laden with debt that it passes on to Chinese banks.

“China’s debt problem lies with the corporate sector,” Societe Generale analyst Wei Yao wrote in a note. “The cure should be capacity consolidation and debt restructuring, rather than another stimulus package targeted to boost investment demand.”

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