China's Hard Landing? More Like a Crash Landing... Saturday, 26 November 2011 – Melbourne, Australia By Shae Smith

China's Hard Landing? More Like a Crash Landing...
Saturday, 26 November 2011 – Melbourne, Australia
By Shae Smith
.............................................................................................................................................................................

A warning call for Aussie stock investors

Just when you thought stocks were recovering after the recent sell-off…

New research shows that a BIGGER collapse in Aussie stock prices could be “dangerously imminent”.

Click here to get the facts, before it’s too late.

.............................................................................................................................................................................

There's no escaping the Eurozone crisis. It even managed to keep China away from the headlines. However, in recent days China has fought its way back to the front page.

Why?

Because China's about to lose its biggest export market.

As the Euro crisis grows, European consumption is rapidly falling. Meaning China will be hit where it hurts... their manufacturing sector.

According to Bloomberg News, 'China's exports rose at the slowest pace in almost two years in October as Europe's deepening debt crisis crimped demand.'

Crimped demand? Demand from Europe has tanked since August.

In August, export growth was a robust 22.3%. Less than a month later, it had tumbled to a tiny 9.8% (that's tiny for China).

And there's worse to come. Lu Ting an economist with Bank of America says export growth will fall further.

In total, Ting believes export growth to Europe could be just 10%... for the whole of 2012.

However, it's not just Europe shrinking Chinese exports. The Purchasing Managers Index (PMI), a gauge of manufacturing activity has taken a dive too.

HBSC believe the index will drop to 48 (a PMI Index number below 50 shows manufacturing is contracting). In other words, China's factories aren't producing as much as they were.

As Europe deteriorates, Chinese officials are facing some economic numbers they don't want.

Is there a solution to this? After all, China obviously can't fix the Euro Zone problem? So, is there anything it can do?

Just in case those in charge in the Middle Kingdom (China) were out of ideas, two economists have a suggestion. Their favourite 'fix-everything' tool - more stimulus.

Alistair Thornton, a Beijing based economist sees monetary interference as China's only option. He said, 'A bleak outlook in advanced economies will continue to feed into China's trade data, acting as a break on growth and potentially forcing the authorities hand in rolling out monetary easing.'

Thornton isn't the only one who thinks stimulus is necessary. Mark William, an economist at Capital Economics predicts a change in policy. 'The unexpectedly sharp drop in China's flash PMI for November, if corroborated by other indicators is likely to push policy makers to go beyond "fine-tuning" to out easing.'

Let the stimulus begin... Again

If the latest batch of lending data from China is anything to go by, a loosening monetary policy is already underway.

Lending data for October was 586.8 billion yuan (AUD: $95 billion), far higher than the predicted 500 billion yuan estimated by a Bloomberg News survey. If that wasn't enough, China's on track to lend over 7.3 trillion yuan:

Money supply growth and loan growth
Source: alsopranchanalyst.com

When the People's Bank of China (PBOC) tightened lending criteria this year, most rural sector small business were unable to get credit. Simply because the increased reserve requirements for credit unions limited the amount of funding from the banks.

But now the PBOC is looking to stimulate the economy... including the rural areas. The aim is to get borrowed yuan out there to boost spending from small and medium businesses.

At the same, central bankers will hope for a lift in private consumption as well.

Frighteningly, this lend-like-no-tomorrow concept is likely to be pushed by central bankers into next year as well. It's speculated that 7.5 trillion yuan would be lent next year. And if the problems in Europe don't go away, you can bet the credit figures will go higher... and higher.

However, mainstream economists still don't get it. Sun Mingchun, head of China research for Daiwa Capital market in Hong Kong says higher lending for 2012 will '...significantly reduce the risk of a hard landing in the fourth quarter.'

Do worry - The Chinese can't fix it

Greg Canavan of Sound Money. Sound Investments, is alarmed at the faith in Chinese officials' ability to 'print and fix' their way out of the problem. In a recent note to his subscribers, Greg wrote:

'While the markets might be concerned, there is still the general feeling of complacency the Euro debt situation will work out or that the Chinese authorities won't let anything bad happen to the Chinese economy.'

Simply put, the central bankers controlling China's economy are running out of ideas. And there's no way China can replace Europe's export value by encouraging Chinese domestic consumption.

At some point, the authorities will just have to accept that like the West, they can't print the problem away.

If Greg Canavan is right, Sun Mingchun's prediction for avoiding a hard landing is wrong. In fact, China could be in for more of a crash landing rather than a hard landing.

Shae Smith
Editor, Money Weekend

Publisher's note: Greg Canavan is the foremost authority for retail investors on value investing in Australia. He's the former head of Australasian Research for a major asset-management group and a regular guest on CNBC, Sky Business's 'The Perrett Report' and Lateline Business. Greg shares his insight, ideas and investment recommendations with readers of his Sound Money. Sound Investments newsletter... to find out more information on Greg's letter, go here.



If you would like to contact us regarding your subscription, please email cs@portphillippublishing.com.au

For editorial enquiries and feedback, email moneymorning@moneymorning.com.au

.......................................................

Premium Resources for Money Morning Readers:

Australian Small-Cap Investigator: Uncovering the most promising small-cap shares on the ASX - Trial Subscription

Diggers & Drillers: Australia's finest publication for the resource investor - Trial Subscription

Australian Wealth Gameplan: An alternative way to manage your investments and help you to build real, lasting wealth. - Trial Subscription

Slipstream Trader: Maximise the overall return you get on your large cap stock portfolio by spotting and acting on 'Slipstream' signals. - Trial Subscription

SoundMoney
SoundInvestments:
Greg Canavan's fortnightly report on Australia's most undervalued stocks includes a full portfolio of current buy, sell, and hold recommendations – for you to incorporate into your financial planning as you see fit.. - Trial Subscription

Free Resources for Money Morning Readers:

Daily Reckoning: Independent and critical perspective on the Australian and global investment markets. - Free Subscription


.......................................................

.......................................................

Aussie manufacturing is getting hammered in 2011. But another ‘toxic sector’ could take an even bigger battering in 2012…

Manufacturing start-ups vanished this year. A Dun & Bradstreet study shows new start-ups in manufacturing have slumped from 700 a year on average for the past 3 years… to just 14 in the first six months of 2011.

No surprise manufacturing stocks fell like a stone this year.

But shocking new research has uncovered the next ‘toxic sector’ to fall in 2012. Find out what it is here.

.......................................................


.......................................................

Thousands now trade the markets
who never thought they could...

Breakthrough in trading techniques helps regular investors:

* Determine how much to risk in a trade
* Lock in profits while the position is still open...
* Exit a losing position before a share tanks...

If you thought trading was too complicated, prepare to be surprised... click here

.......................................................


Money Morning | New to Money Morning? | Free Subscription | Contact Us | Advertise

All content is © 2005 - 2011 Port Phillip Publishing Pty Ltd All Rights Reserved
Port Phillip Publishing Pty Ltd holds an Australian Financial Services License: 323 988.
ACN: 117 765 009 ABN: 33 117 765 009

Terms and Conditions Privacy Policy Financial Services Guide

We encourage you to republish our material, all we ask is that you provide a working text link back to the original article on this site.

Click Here to Unsubscribe from Money Morning Australia and associated external offers sent from the Money Morning Australia. To cancel by e-mail, write us at: cs@portphillippublishing.com.au, or phone 1300 667 481. Customer Services business hours are Mon-Fri 9am-5pm AEST.



Reply

Forward


Click here to Reply or Forward
Gold Could hit $2,000
Ads – Why this ad?
You can buy almost $10,000 worth of Gold with a $500 investment only
www.xForex.com/Gold-Trading


Money Weekend
moneymorning@moneymorning.com.au




Show details
Ads – Why these ads?
Learn the Trading Secrets
Join the Online Trading Market! $100,000 Demo, Free 1 on 1 Training
www.fxtg.com/AU
Dividend Stocks To Buy
Australian Stock Market - Get Free Access To The Latest Free Report
www.FatProphets.com.au
Two Transfers Fee Free
Great Rates on International Money Transfers. Low Fees. Big Savings.
www.OzForex.com.au
91% Accurate Stock System
No Guessing - No Hunches - No Missed Trends - EVER - Learn More!
www.MarketTrendSignal.com
Australian Stock Report
Our Team will show you which Stocks to Buy & Sell Everyday - Free Trial
www.AustralianStockReport.com.au
The Coming 2011 Crash
Read This Before the Stock Market Crashes!
www.Fool.com.au
Chart Patterns Explained
Charting Made Easy By John Murphy Comprehensive Free PDF Ebook
www.TradersLog.com
More about...
Stock Market »
China »
China S Economy »
Chinese Yuan »
0% full
Using 54 MB of your 7662 MB
©2011 Google - Terms & Privacy