China hit by cash crunch, factory output fall

Screen shot 2013-06-24 at 9.45.36 AMChina delivered a one-two punch of negative economic data this week, hitting first with an initial report on factory activity falling to a surprise nine-month low and then with interbank lending rates rocketing to a record high.

The gloomy numbers keep fears alive that the world’s second-largest economic engine is not just slowing down — but also seizing up.

China’s main seven-day repurchase rate jumped to a record 12% this Thursday, according to CME Group. China’s weighted average overnight repo rate hit 13.1% — the highest in more than a decade.

The rate spikes are a reaction to Beijing’s decision earlier this week to withhold new infusions of cash into the markets. One of the central bank’s aims is to slow the growth of China’s ballooning debt and stop easy access to credit.

The country’s total debt is estimated to stand at more than 200% of GDP when debt from the central government, local governments, corporations and households are included, says Swiss bank UBS.

In April, Fitch had warned China of its high debt levels, downgrading the country’s long-term currency rating. The ratings agency cited expansion of easy credit and structural weakness in China’s economy.

However on Friday, repurchase rates fell on reports that China’s central bank had supplied more than $8 billion in new liquidity to ease the current cash crunch.

On June 20, the same day that China’s repurchase rates hit record highs, HSBC’s June “flash” purchasing managers’ index fell to a nine month low of 48.3. A PMI reading below 50 indicates contraction in the country’s manufacturing sector as new export orders plunged from major trading partners like the United States and Europe.

Some China watchers fear the country will miss its self-imposed 2013 growth target of 7.5%.

Since June 1, China’s benchmark Shanghai Composite Index has fallen 10%.

 

 

 

Source : CNN | June 21, 2013

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Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. http://www.NovaAdvisors.com thomas@NovaAdvisors.com USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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