Economic indicators continue to paint a bleak picture of Chinese growth. Cited by various central banks as one of the major factors affecting the global economy there is little China can do to improve the narrative around its economy. The fact that transparency is still a foreign word when it comes to its economy has not helped the Chinese authorities to deal with this lack of confidence from foreigners and chinese investors alike. The stock market sell off is a perfect example of economic growing pains that was the result of badly handled expectations by the People’s Bank of China (PBOC)
There is also the fact that given the state of the global economy economic indicators have not been taken in context. China has slowed down, but then again so has the rest of the world. The Federal Reserve pledged an end to lower rates more than two years ago, which triggered a “taper tantrum” and still the market waits for the start of a tightening cycle.
The Chinese purchasing managers index (PMI) published by Caixin and Markit gives a third party view of business conditions. After the record breaking pace of the past, it is no surprise the PMI figures have dropped into contraction at 47.1 (a six year low) but still close to the index reading of expansion (50). The preliminary version of this report published on Tuesday, September 22 will give traders a good idea of the state of Chinese factories.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.