Latest Chinese PMI number indicates contraction

The preliminary HSBC China PMI for November was released one or two days ago. It shows a drop from 51 in July to 48 November. Generally, a PMI number above 50 indicates growth while below 50 indicates contraction.


Chart: Chinese PMI (Source: CNN Money)

This negative report adds to the long list of market concerns. If this preliminary report is correct, the probability of a soft-landing for the Chinese economic is beginning to look less likely. Some optimists feel that the prospect of a grim outlook would prompt the Chinese government to ease off its current tightening policy. We will have to wait & see whether that will be the case & if so, whethre that would save the Chinese economy from a hard-landing. The prospect of a hard-landing in China, a recession in US and a collapse of the Euro would make for a perfect storm in the financial market.