We expected economic conditions in China to deteriorate faster (at least for the next few months) than most had forecast, and that seems to be coming to pass. From Reuters:
Chinese factories slashed output and workers at a record pace in December and manufacturing activity overall fell for a fifth month as the global financial crisis hit export demand, a survey by brokerage CLSA showed on Friday.
The figures, which CLSA said showed a sector close to recession, spell further gloom ahead for the Chinese economy and highlight the urgency with which the government is trying to cushion the country from the effects of the global crisis.
“Chinese manufacturing activity was very weak in December…,” Eric Fishwick, head of economic research at CLSA, said in a statement.
“With five back-to-back PMIs signaling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession,” he said…
Official statistics showed that factory output grew just 5.4 percent in the year to November…
While the government is aiming to maintain growth at 8 percent in 2009 — down from the 9.9 percent annual pace in the first nine months of 2008 — many economists say growth could be well below that in the first half of this year.
The PMI suggested tough times ahead for manufacturers, which could demand a stronger policy response from Beijing.
New orders continued to shrink in December, at the second-fastest pace on record and marking the fifth straight month of contraction. New export orders also declined at the second-sharpest pace in the history of the survey.
Firms’ backlogs of work fell at the sharpest pace on record, and they accordingly cut their work forces by the biggest margin ever, boding ill for the government’s efforts to preserve as many jobs as possible to help maintain social stability.