From official statistics, I think the Chinese economy is in dire straits. However, important indicators indicate that there may be problems first for the second largest economy.
Meanwhile, according to government data, the Chinese economy is said to have grown by almost 8% in the quarter to July. This is a pretty impressive growth, even for emerging market economies like China.
Chinese mild steel
But on the other hand, recent data show a nasty weakness in the country’s steel production. According to World Steel Association data, August fell 13.2% year-on-year. This is very important because China will produce more than half of the world’s steel, or about 1 billion tonnes in 2019, much of which is used in the country’s manufacturing and construction industries. In other words, the weakness of steel production is equivalent to the softness of China’s manufacturing and construction bases.
To make matters worse, China remains the only country in the top 10 steel producers to see a decline in steel production over the same period. According to the World Steel Association, Japan, the United States and Brazil all saw double-digit increases. data.
Deja Vu again?
I wrote in June 2015 about a more dramatic slowdown in China’s steel production, arguing that it could have caused bad economic news for communist countries. Sure enough, China’s poor economic news came out in August 2015, causing the global market to collapse.
As such, investors may need to be careful about holding shares with exposure to China, such as the iShares MSCI China ETF.