CHINA’S LANDING: SOFT OR HARD?

17 REASONS WHY CHINA’S ECONOMY IS HEADING FOR A HARD LANDING

MoneyWeek, 7 June 2012

Is China’s economy heading for a hard landing? We think so – which is why we think you should steer clear of everything from most industrial commodities to Asia-dependent luxury goods firms.

It is hard to tell much (except the general trend) from the official GDP numbers, so with this in mind, here’s a list of reasons to think that all is not well in the economy the bulls hope will be the financial saviour of the West.

1. The FT reports that Chinese buyers have deserted the Hong Kong art market. Six months ago, they accounted for around 44% of Sotheby’s sales. That is now down to more like 20-25%. Kevin Ching, chief executive of Sotheby’s Asia, noted that “there used to be five to six mainland Chinese individuals who would bid like crazy here, but they did not make any offer in spring sales.” Sotheby’s reported a net loss of $10.7m in the first quarter.

2. ICIS.com reports that demand for polyethylene, which has long been “a very reliable leading indicator for the economy”, is no longer rising but falling (down 6% overall).

3. The FT again – reporting that Chinese buyers have started to “defer raw material cargos” in a “hand to mouth” market. Traders are reporting requests that cargo deliveries be deferred, but also an increasing number of defaults.

4. The Purchasing Manager’s Index (PMI) is at a five-month low. Headline PMIs are also falling across the rest of Asia.

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