The Recession In China Has Begun

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Photo: dbgg1979 | Flickr

This post originally appeared at 24/7 Wall St. The recession in China has begun. Normally a recession would be marked by two quarters of GDP contraction. The Chinese economy needs a momentum of much more than that to retain growth of its middle class, essential to internal consumption, and the progress of its state-owned companies, which substantially control the economy. China has attempted to reverse its slide with monetary and bank policy. That has not worked. The government expects GDP expansion of about 8% this year. That will not happen.

The HSBC flash PMI showed 48.1 for last month. Hiring dropped to a two-year low. The lead economist of HSBC put the news in context. Qu Hongbin said, “With new export orders sluggish and domestic demand still softening, China’s slow down has yet to finish. This calls for further easing to come from Beijing.”

Easing may not help, though. China’s mighty export machine has been hampered by low demand, particularly because of the economic crisis in Europe. The European Union is the largest economy in the world, based on gross domestic product. Japan’s economy is also troubled. While the U.S. has started a recovery, it is tentative. As long as unemployment stays above 8% and home prices continue to fall, the recovery is incomplete.

Read the rest of the story at 24/7 Wall St. >

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