Monday, May 23, 2011

China's Shanghai Index Falls Nearly 3%

China's Shanghai Index fell 2.9%, as the latest data showed weakening growth in local Chinese manufacturing.  This is the result of the Chinese central bank, the People's Bank of China, slowing the growth of the Chinese money supply in order to battle price inflation in the country.

China has shifted to being a net-seller of U.S. Treasury securities over the last five months.  This shift means the PBOC is no longer printing yuan to buy such securities.

Bottom line: China is well into the early stages of a business cycle downturn. It won't be pretty.

No comments:

Post a Comment