AUGUST 27TH 2015
CHINESE STOCK PLUNGE DIVERTING ATTENTION FROM MANUFACTURING WOES
Global media feeds have been saturated with the speedy annihilation of share prices as a result of a lofty correction to Chinese stocks. Market nerves wiped $1.5 trillion off the value of Chinese shares in just two days; beginning with what has been labeled as ‘black Monday’. The Mainland’s benchmark Shanghai Composite continued its fall on Wednesday falling 1.27% taking total falls to around 16% this week.
This novel challenge to investors comes as central planners appear to be standing firm on their new gambit of non-intervention on a daily basis for the local stock market. What has happened this month has been the fifth lending rate cut since November, brining interest rates 4.6% in a bid to calm markets and deliver China’s 7% growth target for 2015.
Media outlets and indeed, the general public are more interested in the immediate disturbing story of such large erosions to markets than deeper underlining trends. By now, most China watchers would be aware of what has become known as ‘the new normal’ and the push to avoid a hard landing. In the midst of a juicy story of traders, speculation and harsh corrections, discourse on China’s manufacturing sector is anemic.
Annex Asia has reported on the new 10-year plan of ‘Made in China 2025’ (previously ‘China Manufacturing 2025). The plan, drafted over more than two years, with the supervision of 150 experts places priority on 10 industries, setting ambitious goals designed to transform China into a global manufacturing superpower.
This week, Vice Premier Mai Kai spoke at the founding ceremony of a national consultative committee for upgrading the manufacturing sector. The push comes as deep issues permeate the sector.
Manufacturing activity shrank at its fastest pace in three years this August. The official Purchasing Managers’ Index (PMI) is now estimated to be between 49.7 and 47.1%. Depending on which figures you take this means that factory activity may have shrunk at its fastest rate in almost 6.5 years. Official PMI factory figures are due to be released on September 1st. In the meantime the currency has been devalued and it is becoming evident that central planners’ interventions are no longer coming from the cure all playbook.
As the economy continues to be pushed toward a consumption-based correction path, manufacturing and exports remain a key concern. Those in managerial positions can only feel safe, effective and at ease knowing quality controls and certifications are up to date.
Annex Asia Publishing