Chinese Manufacturing Slows In January 2011

Click here for link to article.

Summary:

In an effort to lower prices in the manufacturing sector over the last year, Chinese government officials inadvertently decreased the expansion of the manufacturing sector and began to slow down its forward progress. This article cites the Purchasing Managers Index, or PMI, to show how the manufacturing sector is slowing. In December, the PMI had dropped a dramatic 1.3% to remain shortly at 53.9. Now, it is barely hovering above the 52.9 mark, which is fairly low for a country such as China. Production, exports, and unemployment all dropped by 2%, but the prices of raw materials continued to be on the rise. According to a research analyst in China, these statistics are a good indication that the economy is slowing remarkably. In addition, China's Consumer Price Index, which measures inflation, rose by 3.3% in the year of 2010. The federal government's intended target was around 3%. Mounting inflation pressure forced the People's Bank of China to adopt more tightening measures. The central government showed its strong arm in this issue by imposing tougher measures in cities where home prices are skyrocketing by increasing the minimum down payment requirement for the purchase of a second home. The Chinese see the positives in this situation, as they note that the current 10.3% economic growth is too high, and they want to avoid a boom and bust cycle at all costs.

Significance:

This article was very interesting in that the Chinese government is trying to eschew a rapid economic growth in favor of a slower, and more gradualistic increase in production, exports, and profits. The idea of a "strong state" is very much a part of this article and situation. The Chinese government is not afraid of stepping into the housing market or manufacturing sector to fix what it sees as problems. This also ties into the idea of a unitary state because the national government, not local or provincial governments, ultimately has the last say. Gradualism, this time in terms of economic growth rather than the formation of a democracy, is also very present in this article. The Chinese government does not want a boom and bust style of economy; instead, it wants a slowly growing, yet always prosperous and profitable economy. The government plays a big role in the development of this economy.