Seems to be some credence to the notion that China is working to expand its service sector vs manufacturing and construction:

China Services Industry Expands at Faster Pace

June 4 (Bloomberg) — China’s services industry expanded at a faster pace in May, according to a survey of purchasing managers released by HSBC Holdings Plc and Markit Economics.

The PMI rose to a 19-month high of 54.7 in May from 54.1 in April, HSBC and Markit said today. The result contradicted a government-backed survey of services businesses released June 3 and signs from other data that a slowdown in the world’s second- biggest economy is deepening.

China’s stocks rebounded today from the biggest drop in six months on speculation the government will accelerate measures to spur consumer spending. The Ministry of Finance said yesterday it will offer consumers subsidies for purchases of energy-saving home appliances including washing machines, water heaters and refrigerators.

“This should reduce the fears of a sharp growth slowdown,” Qu Hongbin, a Hong Kong-based economist for HSBC, said of the PMI reading.

The Shanghai Composite Index rose 0.4 percent as of 10:47 a.m. local time after sliding 2.7 percent yesterday.

6 Responses

  1. Is there any chance that the Chinese actually understand the operational realities of a fiat currency? Their bank driven lending isn’t really any different than fiscal policy after all, it’s just in disguise.

    Maybe their fear of inflation held them back, but now that things are getting serious we’ll see what they really prioritize?

      1. @WARREN MOSLER,
        This may be a source of concern for the Chinese however Western educated clowns may be held at the universities as a part of the camouflage propaganda operation.
        Do they really have any significant impact on the decision-making process? I doubt so.

        If I ask a Chinese software engineer sitting next to me whether governments are fiscally constrained and can always stimulate the economy during a downturn – his answer is identical to mine. Of course not because they can always “print” and spend money. This is our EXPERIENCE not the economic theory. If too much money is spent – there will be some inflation, but so what? Then they need to spend less and constrain bank lending.

        If I ask a guy who was educated in the “West proper” I will get the usual rubbish response about borrowing, crowding out, hyperinflation, etc.

        The Chinese are pragmatic – they don’t care about crazy or dumb ideas like us, stupid followers of Plato and Plotinus or worshippers of absolute moral rights in regards to private property coming from the Roman law, regulating ownership of slaves.

        If something doesn’t work they stop doing that. If something works – they do more of that. You don’t need to study the theory of gyroscopic forces for a year or so to ride a motorbike. I am sure that 99% of the bikies are not physicists but everyone knows how to use counter-steering. The Chinese are like bikies – they ride bikes, not speculate about how to turn the handlebar and lean your body.

  2. China just announced it was going to buy nearly a year’s worth of output from one of its most over-leveraged solar panel companies, about to go under. Therefore saving it from stopping operations and laying off thousands (and still collecting taxes from said workers). Getting solar panels at dirt prices.

    In the West we have just let all the solar panel companies go bankrupt, laying of thousands, returning near zero to investors, and letting perfectly good factories sit idle.

    I’d say the Chinese “get it”

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