Courtesy of Mish.
The much-denied hard landing in China is now underway with weakening data everywhere one looks. Today there is More Bad News For China as FDI Falls.
Foreign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound.
Investment declined 8.7 percent from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010. The Ministry of Commerce released the data at a briefing in Beijing today.
Chinese financial institutions sold a net 3.8 billion yuan ($600 million) of foreign currency last month, indicating capital is flowing out as property curbs and weakness in exports slow growth and the yuan weakens.
China’s slowdown may extend into a seventh quarter after export growth collapsed in July and industrial production and lending missed economists’ forecasts. The nation reported a $71.4 billion capital account deficit in April-through-June, the biggest quarterly shortfall in data going back to 1998.
Caterpillar Inc. (CAT), the world’s largest maker of construction and mining machinery, shut its main excavator factory in China for much of July and had employees on shortened work weeks, Mike DeWalt, director of investor relations at the Peoria, Illinois, company, said in an Aug. 8 conference presentation, according to a transcript.
“The current sales level in China is quite depressed,” DeWalt said. “We’ve cut production there.”
Pettis on Debt, Currency Wars, Commodity Prices and Capital Flight in China
Via email, Michael Pettis at China Financial Markets has a few comments on debt, commodity prices, and capital flight in China.
Any sustained increase in the growth rate of Chinese consumption – if indeed this occurs, which in my opinion is very doubtful – will not only have to compensate for a reduction in the growth rate of Chinese investment, but might also have to compensate for a reduction in China’s current account surplus. What is more, the crisis in Europe will only make the global trade environment tenser and nastier.
Notice already what is happening in commodity-exporting countries like Indonesia. According to an article in Thursday’s Wall Street Journal: Indonesia’s Trade Gap Signals Tougher Times
Indonesia’s trade deficit hit an all-time high in June as exports from Southeast Asia’s largest economy fell sharply, a sign that weaker demand from China and the West is affecting some of the few countries still growing at a considerable clip.
A third straight month of trade deficits in one of the world’s biggest commodity producers bodes ill for Indonesia, which had become a darling of foreign investors looking for fresh opportunities, but has struggled to contain the damage from a sharp fall in its currency in recent months that has rattled investors.
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