Chinese Manufacturing Up; Exports and Inflation Lag

Published on Author Christian von Hassell

The HSBC PMI reached a seven month high this past February, as manufacturing activity continued to grow in China. However, export orders and deflation still lag behind, two persisting issues which recently spurred the central bank to cut interest rates.

As China transitions to a more consumption driven economy, we might expect some divergence between export numbers and manufacturing output. However, the current situation seems more problematic than such a switch. Furthermore, we might see monetary policy grow less effective at boosting exports for Asian countries as many in the region race against each other to devalue their currency. While this might help trade with nations located further away, it does very little good for these nations’ trade flows within the region.

One Response to Chinese Manufacturing Up; Exports and Inflation Lag

  1. We read the nostrum of a “consumption driven economy” but how can that actually be achieved? What might encourage households to save less and consume more? Firms to accumulate fewer financial reserves and invest less and instead pay workers more?