China Growth in Doubt Part 2

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Global Trade, Macroeconomics

The first part of this story can be found here.

We, the editors of MetalMiner never intended to write a second piece on China’s growth prospects. So why are we doing that not even a week later? Because Bloomberg had an interesting story completely discrediting our original point of view published just last week, August 7. In that blog post, we concluded a few points. First, that the Chinese authorities are having some trouble managing the economy due to inflation and the need to maintain strong growth. Second, the three-year-old Purchasing Manager’s Index signaled contraction on exports (the reading fell below that magic 50 number) as well as a drop in new orders. We concluded that China is not immune from the global economy and we called for a pause in the Yuan appreciation.

And Bloomberg has concluded otherwise. According to the article, “China’s trade surplus unexpectedly widened in July and producer prices rose at the fastest pace in 12 years, adding pressure on the government to let the Yuan resume its appreciation.” The article goes on to say that overseas shipments grew “at a revised 17.2 percent in June.” Moreover, according to a number of analysts surveyed by Bloomberg, the Yuan is expected to strengthen 3.6 – 6.63 percent against the dollar, in the second half of the year.

So who is right – who knows. Eventually, high prices hurt profits and it’s hard to grow new jobs when profits deteriorate. Our next post will cover the numbers from a steel perspective.

–Lisa Reisman

Comments (2)

  1. A friend of mine just emailed me one of your articles from a while back. I read that one a few more. Really enjoy your blog. Thanks

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