People in glass houses might consider investing in stronger windows. China bears responsibility for much of the world’s current economic malaise. Despite reported growth of 7 per cent — the economy is slowing; it has become a drag. In contrast, the US’s second-quarter growth is estimated at a mere 2.3 per cent over the prior quarter — less appealing, but at least accelerating.
China’s slowing growth is not a big surprise. Authorities are trying to rebalance the economy away from investment and exports to a more consumer-led model. Yet recent data has led to doubts about whether China can achieve its aims. On Friday, the Caixin purchasing managers’ index fell for the third month in a row to 47.1, contracting more than expected. Factory output, new orders and inventories all showed trends worsening at an even faster rate than July’s two-year low. Also worrisome, smartphone sales into China fell for the first time on record, says Gartner.
Furthermore, state attempts to reboot retail investor enthusiasm with stock-market-supporting measures have undermined belief in the central government’s competence. The knock-on effects have spread beyond China’s plummeting stock markets (among only a handful of major indices still in the black for the year). This week, waves of selling rolled round the emerging markets. Even the US was eventually caught in the wake.