Tuesday, June 1, 2010

China's Manufacturing Expansion Slows; Property Sales in Big Cities Plummet 70%

The world's best (last?) capitalists [centrally organized at that] are trying to thread a needle of popping a real estate bubble in major cities, while not sacrificing the general economy. Based on today's data from China (always taken with a grain of salt) they seem to be doing so... however with all the world now tied to China's voracious appetite for... well everything, when China slows down, the world has to worry. As China goes, so goes a potential double dip in the West.

Of course the Chinese market - amongst the weakest in the world in 2010 - has been telling us 'something' was happening for many months...

First the manufacturing data; there are 2 reports - one government and one not - both saying similar things: still expansionary but down from peak.
  • China’s manufacturing expanded at a slower pace than estimated in May, prompting stock declines across Asia on concern growth in the world’s third-largest economy may slow.
  • The Purchasing Managers' Index fell to 53.9 from 55.7 in April, the Federation of Logistics and Purchasing said, less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. A separate index released by HSBC Holdings Plc and Markit Economics fell to 52.7, the lowest level in a year.
  • HSBC’s survey, covering more than 400 manufacturing companies, is weighted more toward smaller, privately owned business than the government’s PMI, according to the bank. The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, covers more than 730 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.
  • “The fall in the headline PMI shown in the May surveys might be an early sign of a slowdown” in China, said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. It “may be exacerbated by euro-area weakness and recent measures from Beijing to rein in the property market.”
  • Premier Wen Jiabao said yesterday in Tokyo that the world needs to guard against the possibility of a second economic slump.
  • Restraining inflation expectations and keeping housing affordable are two of the government’s key goals after urban property prices jumped a record 12.8 percent in April from a year earlier.

On to the property market:
  • Property sales in Beijing, Shanghai and Shenzhen fell as much as 70 percent in May as developers delay sales following government tightening measures.
  • In China’s capital Beijing property signings slumped nearly 70 percent to 3,357 in May from April, the Shanghai Securities News reported, citing data from bjfdc.gov.cn. In Shanghai, the nation’s financial center, transactions may have dropped about 70 percent to 2,550 signings, the paper reported, and in the industrial city of Shenzhen, sales fell 62 percent.
  • China has restricted pre-sales by developers, curbed loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for second-home purchases.
  • China’s property market problems are worse than in the U.S. or U.K. before the financial crisis, the Financial Times said today, citing an interview with Li Daokui, a member of the Chinese central bank’s monetary policy committee. The country’s housing market problems combine a possible bubble with the risk of social discontent, he said.
  • Shi Weijian, an analyst at Jianghai Securities, said Shanghai’s government may announce a property tax as early as this month, which will likely be implemented at the end of the year. Shanghai home prices may fall between 25 percent and 30 percent from the introduction, he said.
Remember, according to the all knowing seer Alan Greenspan, bubbles are invisible things that Westerners have no hope of ever seeing. (even with very thick glasses) You can only fix the havoc of burst bubbles with a flood of easy money - so says the Maestro. Apparently, China does not believe in the Maestro and actually is attempting proactive measure - something the U.S. was all about 50 years ago.

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