There has been constant chatter about the end of the great Chinese expansion the possibility of a hard landing in that country after years of incredible growth. Recent data (2 Sept) from measures of manufacturing in China point to a different story with the official Purchasing managers Index (PMI) rising to a 16 month high of 51 while the HSBC PMI index rose the most in three years to 50.1. For both indices a reading above 50 indicates expansion. One month of good data does not make a recovery make. However, the twin forces of improving domestic demand within China and strengthening export demand from slowly improving European and US economies should continue to bring China out of its present drop in growth. Furthermore the big shift from export and investment led growth to local consumer demand will be a big change but not of a scale the Chinese government have not managed before. This is important for Australia and New Zealand whose economic trajectories are closely woven with China, as both of them have China as their biggest export markets. Furthermore Australia is New Zealand’s next biggest export market so we are in effect have a double bet on China.
Looking more at the long term The Economist magazine has a video (see below) examining China’s economy, how it might be restructured and why a crisis similar to what happened in developed countries is unlikely. Their conclusion, in agreement with recent economic figures, is that there will not be a hard landing in China.