2015-06-24

China Slowdown Has Barely Begun

The slowdown in China's economy first caused great pain for iron ore miners and steelmakers. These industries are in the higher stages of production and are typically the first to be affected by an economic slowdown.
This is also happening inside of China, as I discussed last year in Liaoning Sounds Warning on Chinese Economy. I warned that the slowdown in Liaoning province may not have been an isolated slowdown, but the early stages of a larger downturn in the business cycle.


Now the slowdown is moving to the right, into capital goods.

Bloomberg: The World's Biggest Economies Are About to Feel the Impact of China's Slowdown
Emerging markets and commodity suppliers have grappled with reduced demand from China as a property downturn weighed on the world's second-largest economy.

U.S., Japanese and German exporters did better, supplying capital goods like machines that China still demanded. That may soon change, according to a study of global exposure to China by UBS Group AG economists Donna Kwok, Wang Tao and Jennifer Zhong.

"As the multiyear Chinese property downshift continues to unfold beyond this year, we may see a longer-term decline in China's appetite for foreign industrial imports,'' the analysts wrote in a report June 22. "Commodity, reprocessing, and developed country exporters alike should brace themselves for the impact of weakening China demand this year, irrespective of whether U.S. or EU imports pick up.''
This slowdown or rebalancing, however you choose to view it, is still in the early stages.

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