Although the Chinese communist regime set out to showcase China’s prosperity during the Beijing Olympic Games, signs suggest that the Chinese economy may be entering a period a recession.
Recently, the China Federation of Logistics and Procurement announced China’s August Purchaser’s Management Index (PMI) is 48.4, the same as July’s reading. PMI is an indication of whether the manufacturing industry is expanding (readings above 50) or shrinking (readings below 50). China adopted this index since 2005.
Tianlun Jian, Senior Economist from Eaton Corp., believes that the Chinese economy is slowing down, especially after the PMI shows a negative increment.
“In the coastal areas such as Guangdong, Fujian, and Zhejiang [provinces], foreign investors plan to move their investments out of China, some have already moved out, some want to cut or reduce the volume of their export products,” Jian said.
He believes the current situation is the result of the strengthening of the yuan. “The strengthening of the yuan has made inflation a prominent problem; when the economy slows down, there is a domino effect.”
Since 2005, the Chinese yuan has appreciated about 20 percent against to the U.S. dollar. This puts a lot pressure on Chinese manufacturers, whose goods now appear more expensive to foreign consumers.
In early August, a survey from China’s Development and Reform Commission showed over 67,000 small and medium-size enterprises in China went bankrupt in the first half of 2008 due to global economic woes and China’s tight money supply policy put in place to control inflation.
“The current regulation has not reached the strength it should have yet, but more regulation means more bankruptcy. It is really a big problem,” Jian said.
Besides this problem, China’s housing market also is showing signs of slowdown. According to a Shanghai Security News report, July survey results show that the Shanghai real estate market trading area has dropped 70 percent compared to the same period last year, and the average trading price has dropped 24 percent compared to June.
The real estate market in Shanghai’s neighboring cities such as Nanjing, Hangzhou, and Nanchang in the Yangtze River Delta economic development zone also experienced the same downturn in July.
Original article in Chinese: http://www.epochtimes.com/gb/8/9/5/n2253592.htm
