China likely to miss its first growth forecast since the Asian Financial Crisis

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By Jacob Maslow

Drinks plant in china
Drinks Production Plant in China

As the old saying goes, when it rains, it pours. Well, there’s been a downpour of bad economic news coming out of China. First came the results of a slowdown in demand for its products. Second, labor costs in this land notorious for low wage rates are spiking up as a response to widespread worker dissatisfaction. Third, there is currently a housing slump after a massive period of overheating. Indeed, there are a huge numbers of empty homes in China. Now, the recently released numbers for December’s Purchasing Managers’ Index (PMI) paint a clear picture that there’s lower manufacturing demand. While the decline might seem small-the PMI dropped from 50.3 to 50.1, this can’t be anything but trouble for the authoritarian regime in charge of China. At the very least, this latest indicator points to China missing growth forecasts for the first time since 1997. Think about that for a second, China will miss it’s growth forecast-the one that it has been meeting or beating for the past 17 years-since the great Asian Financial Crisis of 1997.

It looks like China will joining some parts of Europe in an economic slump. Usually, the direction of the discussion, when facts like these are on the table, turns to a ‘soft landing.’ Well, one can confidently say China can wiggle its way out of a tight economic spot if only it didn’t have the three adverse factors outline above. No-instead of thinking of soft landings, global investors should keep their eyes focused on the US recovery. It appears that the US economy is finally firming up after being wobbly for several years. Will the US be strong enough to help provide stability for global markets as other markets flounder? One thing seems very likely: the US dollar may continue to strengthen.
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