Authentic voices. Remarkable stories. AOL On Originals showcase the passions that make the world a more interesting place.
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It may be summer in China, but the factory lines aren't heating up. Just released PMI figures suggest the world's biggest ...
export engine is in a holding pattern. While better than bad news, it won't
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It may be summer in China, but the factory lines aren't heating up. Just released PMI figures suggest the world's biggest export engine is in a holding pattern. While better than bad news, it won't comfort those looking for early confirmation of a Chinese economic rebound in the second half of 2012. The market has been expecting a bounce as looser policy from Beijing takes effect, but that's not a given according to JP Morgan. (SOUNDBITE) (English) CHIEF CHINA ECONOMIST FOR JPMORGAN, HAIBIN ZHU, SAYING: "If you talk about year over year growth, I think it's still too early to say the second quarter is a bottom. Actually in our forecast, we're looking at the second half still have about 7.6% growth, so it'll be a flat recovery in the second half." Investors may hang on China's every data release, but mainstream metrics like PMI and GDP might not actually be the best gauge of economic strength anyway. Growth figures could be subject to meddling from anxious regional officials, as incoming Premier Li Keqiang hinted in a leaked US diplomatic cable. Some other readings that rarely command headlines are worth considering. Power consumption, for one, is seen as a reliable gauge of industrial production. If growth in demand for electricity remains soft, or worse contracts, you can bet more pain lies ahead. Cement may be another good indicator, according to Bank of America. That's because it can't really be stored after its produced, and it's very localized in production. Some local governments have quietly turned the stimulus taps back on already, with billions pledged for infrastructure spending. If you want an early warning that stimulus-led construction is actually ramping up in a meaningful way, look for a strong pick up in cement prices first. (SOUNDBITE) (English) GOLDMAN SACHS CHIEF EQUITY STRATEGIST FOR CHINA, HELEN ZHU, SAYING: "We are oveweight on the cement sector at the moment. This is an area that's really been hit pretty significantly in the first half the of the year as cement prices continued to tumble and people were not so sure when that inflection point in terms of investment would come through. We're starting to turn around the corner on that." The central government, for its part, has so far favoured monetary measures. The PBOC is seen cutting interest rates by a further 25 basis points in third quarter, while the amount big banks must keep in reserves will fall by another 100 basis points, according to a Reuters poll. (SOUNDBITE) (ENGLISH) CHINA ECONOMIST FOR BARCLAYS CAPITAL, JIAN CHANG, SAYING: "We do no think government will role out a big fiscal stimulus measures because they want to avoid the mistake made in the 2008 and 9. Because overall economy is still absorbing the consequences of the property bubble, local government debt, excess capacity in quite a few industries, and also inefficient investment." While Premier Wen Jiabao made it clear in comments released this week that containing property prices remains a major priority, he also opened the door to increased government spending in the second half. It may turn out that China's lesser known indicators are the best ones to watch, when it comes to understanding both the health of the economy, and official efforts to prop it up. Jon Gordon in Hong Kong.