By John Richardson
CHINA'S economy would only expand by 5% in H2 of this year and in the first half of 2012 on an annualised basis, said Diana Choyleva, a Hong Kong-based economist for Lombard Street Research.
This was the result of credit tightening as China continued to battle inflation and a slump in export orders for manufactured goods on global economic problems, she added.
The HSBC Flash Purchasing Manager's Index for September, which is a preliminary reading ahead of the release of official factory output figures, fell to 49.4 from a final reading of 49.9 in August. A third consecutive month of contraction, if this preliminary figure is confirmed, would be the softest patch in Chinese manufacturing since the dark days of 2009.
The price of land in Beijing fell by 76 % in August from a month earlier, while in the province of Guangzhou it plummeted by 53%, said Soufun Holdings, China's biggest real-estate website.
Land auction failures surged 242% in the first seven months of this year because of government curbs on the property market, the Beijing Times reported last month.
Prices of new homes declined in 16 out of 70 cities last month compared with July, according to government data.
"We're reaching a tipping point where land sales are dropping much faster than before, developers are losing more access to bank financing, and housing prices are showing weakness," said Zhang Zhiwei, Hong Kong-based chief economist at Nomura Holdings.
China's vehicle sales grew by 3.3% in the first eight months of this year from a year earlier to 11.98m units, said the China Association of Automobile Manufacturers. General Motors predicts sales growth of only around 5% for the full-year 2011 to 19m-19.2m units, compared with growth of around 30% last year. Price discounts have started to spread as sales growth weakens, just as auto production capacity ramps up.
Not surprisingly, the Shanghai A-Index was down some 14% from its July level by late last week.
Commodity prices have also taken a hit with copper, viewed as directly representing a broad range of economic activity, down 22% in September. China is, of course, the world's biggest consumer of copper.
Some petrochemicals have been doing better than others on tight supply, such as monoethylene glycol (MEG).
But where severe tight supply is not an issue, such as in the polyolefins chain, prices keep slipping. Asian polyethylene (PE) was down $20-50/tonne and polypropylene (PP) $10-40/tonne lower, according to last Friday's assessments by our colleagues at ICIS pricing.
We could add many more worrying facts about China. For example, we could detail the level of local government debt that might turn sour if there is severe property-market correction (a 76% fall in land prices in Beijing suggests that such a correction is now a distinct possibility).
It would be fascinating to be able to eavesdrop on board room discussions taking place at chemical companies, as the possibility of 5% GDP growth in China is being contemplated.
Or is such a possibility being contemplated? Has it really sunk in yet that as the rest of the world economy goes to hell in a hand basket, there are no longer any guarantees that China will be able to come to our rescue?