The year has started with another Chinese market meltdown that has many thinking of the collapse last September. The data released this week came in weaker than expected, especially in the industrial sectors.
That has triggered the worst stock slide in nine years. The motivation for the collapse was the fact the manufacturing sector shrank for the fifth consecutive month despite expectations of better news given all the stimulating that had been attempted by China's government. The global markets have all been reacting.
The sense is that markets will be back to more normal levels in the days to come but that is not a certainty. Countries that export to China are getting very nervous, and those that buy are fully expecting the country to start getting far more aggressive as far as their exports are concerned.
All of this is making for a lot of uneasiness as the year starts. The cascade of reactions will affect the United States and Europe somewhat indirectly. If the Chinese buy less from states like Australia, the Aussies will buy less from the U.S. and Europe in turn. It’s a pattern that could be repeated with any nation that has depended on Chinese demand for its own growth. The main reason for the sudden fear is that China has been trying to punch up its growth in the last few months—these attempts have not been that successful
- Chris Kuehl, Ph.D., NACM economist and Armada Corporate Intelligence co-founder