August Report: Chinese Manufacturing Growth Slows to a 14-month Low…


When China announced the One-Road/One-Belt initiative (now banned from discussion in Beijing); in combination with a looming trade confrontation with President Trump; CTH pointed out that sketchy pandas’ bamboo economy was very vulnerable because it was deep, but narrow – simply too dependent on manufacturing and exports.

Slow down the manufacturing sector and, well, there is no fall-back position….. Cue:

BEIJING (Reuters) – China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.

The gloomy findings reinforce views that China’s economy will cool further in coming months, even as the United States ramps up tariffs on Chinese goods. That is likely to prompt more spending and other growth boosting steps from Beijing.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in August from July’s 50.8, matching economists’ forecasts.

Though the index remained above the 50-point mark that separates growth from contraction for the 15th consecutive month, it was the weakest since June 2017. While output improved modestly, most of the other readings were lackluster.

“The manufacturing sector continued to weaken amid soft demand, even though the supply side was still stable…I don’t think that stable supply can be sustained amid weak demand,” Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group, said in a note accompanying the survey.

“In addition, the worsening employment situation is likely to have an impact on consumption growth. China’s economy is now facing relatively obvious downward pressure.” (read more)

♦The 800lb Panda in the room is that China is arguably the least balanced economy in the modern world. Hence, China has to take extraordinary measures to secure their supply chain. This economic dependency is also why China has recently spent so much on military expansion etc., they must protect their vulnerable interests.

Everything important to the Chinese Economy surrounds their critical need to secure a strong global supply chain of raw material to import, and leveraged trade agreements for export.

China’s economy is deep (manufacturing), but China’s economy is also narrow.

This economic structure, and the reality of China as a dependent economic model, also puts China at risk from the effects of global economic contraction. But more importantly it puts them at risk from President Trump’s strategic use of geopolitical economic leverage to weaken their economy.

U.S. President Donald Trump and the U.S. economic team fully understand this dynamic and fully understand the inherent needs of China.

When you are economically dependent, the ‘bully plan’ only works until you encounter a ‘stronger opponent’.

A stronger opponent is an economic opponent with a more broad-based stable economy, that’s US.

President Trump, Commerce Secretary Ross, Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer, Economic Adviser Peter Navarro and NEC Chairman Larry Kudlow represent the first broad-based national team of economic negotiators who know how to leverage the inherent Chinese economic vulnerability.

President Trump will not back down from his position; the U.S. holds all of the leverage and the issue must be addressed.  President Trump has waiting three decades for this moment.  This President and his team are entirely prepared for this.

 

The Olive branch and arrows denote the power of peace and war. The symbol in any figure’s right hand has more significance than one in its left hand. Also important is the direction faced by the symbols central figure. The emphasis on the eagles stare signifies the preferred disposition. An eagle holding an arrow also symbolizes the war for freedom, and its use is commonly referred to the liberation fight of righteous people from abusive influence. The eagle on the original seal created for the Office of the President showed the gaze upon the arrows.

The Eagle and the Arrow – An Aesop’s Fable

An Eagle was soaring through the air. Suddenly it heard the whizz of an Arrow, and felt the dart pierce its breast. Slowly it fluttered down to earth. Its lifeblood pouring out. Looking at the Arrow with which it had been shot, the Eagle realized that the deadly shaft had been feathered with one of its own plumes.

Moral: We often give our enemies the means for our own destruction.

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