Fundamental Problems With China’s Economy, Part One of Two

Deng Xiaoping’s order, to “Let some people get rich first,” was indeed carried out, but not without consequences.

People view a model of a property development being sold at the Beijing Property and Investment Show on Sept. 20, 2012. Soaring housing prices have helped increase income inequality in China, as the rich have gotten richer while the poor have found housing increasingly difficult to afford. MARK RALSTON/AFP/GettyImages

Recent economic data suggests China’s winning streak is coming to an end. Is this a temporary pause or is China’s economy taking a turn for the worse? If so, what are the causes for the change?

Evidence of recent weakness abounds. The HSBC Purchasing Index (PMI) printed 47.9 in September, showing the eleventh consecutive reading below 50. A reading below 50 means China’s manufacturing sector is contracting, not expanding.