China’s manufacturing economy slumped in April, with the purchasing managers index (PMI) for the sector slipping from 51.9 in March to 49.2 last month. 

It was the first time this year that factory activity fell below 50, the dividing line between growth and contraction.

New orders for domestic and export shipments both declined, as did factory employment.

In contrast, Chinese consumers spent more this year than last through the Labor Day holidays on travel and general shopping. Consumers are still venting pent-up demand after three years of strict anti-COVID restrictions.

The PMI for construction and services remained strong, although it backtracked from 58.2 in March to 56.4 in April. Government spending, as well as consumers’, rose.

The country’s housing market also continued to recover from its 18-month crisis that saw key developers default on billions worth of foreign and domestic bonds, which we detailed in “China’s Real Estate Market Teeters on Evergrande’s Debt” (21 Sep 2021), “China’s Real Estate Crisis Grows” (9 Nov 2021) and “Evergrande in Default, Fitch Says” (14 Dec 2021), among other articles.

The value of homes sold in April by China’s 100 biggest developers jumped 31.6 percent, year on year, following a 29.2-percent gain in March, the China Real Estate Information Corp. reported. 

“China’s post-Covid recovery has somewhat lost steam and calls for continued policy support,” Zhou Hao, chief economist at Guotai Junan International Holdings, said to Bloomberg.

China’s Politburo, the inner circle of decision-makers, made no significant changes to the country’s economic policy when it met on 28 April. In a statement, the group said overall demand remains weak. 

“The big surprise in China’s April PMI survey—manufacturing fell back into contraction—raises doubt about the strength and durability of the recovery,” Bloomberg analysts wrote in a note. 

“The key factory sector is shrinking despite strong government spending and robust demand in pockets of the services industries,” it noted. “The recovery is probably too narrow to be sustainable and risks losing steam. This worrisome outlook increases the case for more policy support.”

Although Beijing has targeted 4.5 percent as this year’s growth rate, several major banks have now ratcheted up their 2023 forecast to as high as 6 percent. 

Still, “these mixed signals will likely keep the pressure on the government to continue its supportive fiscal and monetary policies” at least through the current quarter, Zhang Zhiwei, Pinpoint Asset Management’s chief economist, told Bloomberg.

TREND FORECAST: China’s economy depends heavily on manufacturing for export. As the world economy drags along, China’s factory sector will also slump.

That lack of economic input will ripple out into the consumer economy, hobbling the success of China’s “dual circulation” economic strategy of building a robust consumer economy alongside a thriving export industry.

However, when the United States and the European Union lower interest rates and come up with more cheap money pumping schemes, China’s exports will accelerate. 


During the week ending 26 April, investors dumped $550 billion in Chinese stocks, Yahoo Finance reported.

The Shanghai and Shenzhen exchanges together gave up about $519 billion, according to the Financial Times. Firms listed on the NASDAQ Golden Dragon index of Chinese corporations lost $31 billion.

Foreign investors took out about $2 billion.

The selloff followed news that China’s economy grew 4.5 percent in this year’s first quarter, exceeding predictions of a 4-percent bump.

The news caused investors to doubt that Beijing would extend its stimulus programs that have juiced the economy and, therefore, growth could slow in weeks and months ahead, weakening stock values.

Also, doubts are growing that the People’s Bank of China will pare back its recent interest rate increases.

In addition, China’s government has tightened control over the real estate market in an attempt to quell the lingering crisis that pushed the sector to the brink of collapse over the past 18 months.

The government’s tighter hand could discourage home buyers, analysts warned.

“China is now a huge country and cannot grow at the rate it grew 10 years ago,” Mark Mobius, founder of Mobius Capital Partners and a specialist in emerging markets, said in a recent Bloomberg television interview.

“It was growing at 10 percent [annually]. This is gone,” he added. “This cannot be done any more because of the size of the economy.”

TREND FORECAST: As the global economies slow, so too will China’s. And with the U.S. expected to raise interest rates tomorrow and the European Union expected to jack them up on Thursday, it will slow down the major economies of the world which means they will buy less from China. 

On the European front today Eurostat reported that consumer prices in the 20 countries using the euro jumped 7 percent in April from a year earlier. Thus, the interest rate increase will bring down the already weakening EU GDP. 


China will increase its U.S. market share of solar panel sales to 45 percent this year, up from 42 percent in 2022, according to the British-based Solar Media Ltd.

China’s long-time lead in solar panel technology and manufacturing keeps the country’s grip firm on the U.S. market.

China held 64 percent of the U.S. solar panel market in 2020. During the COVID War, supply chain bottlenecks allowed U.S. makers to erode China’s market share. However, that erosion has ended, Solar Media’s analysis indicates.

Also, China has evaded some tariffs on its solar products by channeling them through four other Asian countries, according to an investigation by the U.S. commerce department.

Avoiding tariffs lowers the U.S. selling price of an imported product.

The U.S. government is now poised to levy tariffs of as much as 250 percent on related products from those four collaborating countries, The Wall Street Journal reported.

The tariffs, which would impact an estimated 40 percent of the world’s solar panel market, are under suspension after president Joe Biden set a moratorium on them. 

U.S. solar companies had complained that the tariffs would raise the costs and prices of their projects.

Now a bipartisan resolution to reinstate the tariffs is likely to pass the U.S. House of Representatives, the WSJ reported, as politicians seek to defend U.S. solar panel makers from heavy-handed foreign competition.

The resolution is well-meaning but misdirected, solar industry executives and lobbyists say. 

They are pressing Congress to reject the resolution, claiming that lifting the moratorium could render them liable for as much as $1 billion in back payments, spike project costs, and lead to orders and entire projects being scrapped. 

TREND FORECAST: The 14 months remaining on the moratorium is giving domestic makers time to set up factories and establish supply chains that could give U.S. makers the means to fill any gaps in the market left if Chinese products are more costly or become scarce, according to a 17 April letter to Biden signed by more than 400 U.S. solar firms.

The companies also are hoping to take advantage of the billions of dollars set aside in Biden’s infrastructure budget to support clean and green energy manufacturing. However, with China in control of many of the rare-earth and other commodities essential for solar development, a cheap labor force and advanced industrial baser, we forecast they will continue to dominate the new energy sector.

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