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Will the Chinese economy be a bright spot in the global economy?

Watching articles and blogs around the world leaves one to wonder if the emerging giant will be a port in the storm or just another ship lost at sea with all the other ships. I’m no economist but the economic data doesn’t look favorable to me.

Economic Data-

There is a data packed article that talks through several indicators at stating that “The slow down hits China” . It walks through the PMI data for China’s manufacturing sector which has fallen below 50% and continued to drop in October indicating a “contraction of activity”. More troubling is the fact that the article then goes on to indicate that the slow down in the manufacturing sector, indicating slowed exports, is coupled with slowing domestic demand as the Chinese Consumer Confidence Index (CCI) is dropping as well, according to the National Bureau of Statistics. The article continues with news from the Canton Fair, Hong Kong SAR, Shanghai, China Petroleum and Chemical Industry Association (CPCIA), Ministry of Finance (on SEOs) and Bao Steel. All describing a marked slow down in there respective areas and ends with these words of encouragement:

“During the week, China Chengxin International Credit Rating Co. (a joint venture in which Moody’s Corporation is a partner) said that it expects that China’s economic growth this year will slow to 9.4% for 2008 as a whole. The latest developments suggest that even this forecast may be over-optimistic.”

It’s been a tough week folks but don’t worry just when it seems all is lost the government comes out with a stimulus package that sent the world markets to fluttering.

Stimulus Package

When the Chinese government goes, apparently they go big or so it would seem if you base your judgement on the size of the stimulus package that Beijing announce earlier this week. According to an article by the Associate Press, Investors Cheer China Stimulus Package, the $586 Billion will be spent on infrastructure projects, and lending for rural areas and small companies among other things. From what I have read in other articles a portion of the money will come from the central government but a larger part will come out of the banks and state owned companies that are flush with cash after the last decade of growth. The money is there. They just need to spend it on the the right things.

So will China be the growth engine that continues right on through the turmoil? It’s really hard to say from my perspective. I think the best chance of any place on the planet would be China ,however, I’ll leave the predictions to the analysts and economists. In the mean time, as it was before the economic meltdown, my advice to companies world wide is to invest in capturing China’s domestic market. It’s still growing and that is better then shrinking…even if it is growing slower than last month.