The prediction that China’s economy will not continue to grow at its current blistering pace is looking wiser. The most recently released data on the health of the country’s manufacturing sector are especially disappointing, the Wall Street Journal reports:
The latest sign of sluggishness came Thursday, when preliminary August manufacturing data showed an unexpectedly sharp drop in growth. It follows other signs of a slowdown in July, including weak domestic investment demand, a sharp drop in credit and a third consecutive monthly decline in housing sales.The data have blunted hope among economists that the world’s No. 2 economy would finish more strongly this year after a slow start. That could have implications for the still-slow global recovery, as China has long been a major world growth engine.“In the bigger economic picture, June’s probably as good as it gets,” said Julian Evans-Pritchard, an economist with Capital Economics.
President Xi Jinping has been conducting a party purge in the name of anti-corruption, eliminating powerful rivals while cowing those who remain into silence and submission. For the public’s benefit, he has been playing the humble, dutiful Communist who takes action against the extravagance of China’s elite, while punishing foreign firms in an attempt to bolster homegrown companies.As we’ve argued, Xi aims to make China’s power structure leaner, meaner, and more dependent on one man than it has been since Mao died—all in the expectation that both geopolitical and the global economic trends will not be going China’s way. It’s too early to know how the country’s economy will finish out the year, but this looks like a sign that rougher seas may be ahead.