China’s growth slows

China PMI.jpg

China’s growth rate is slowing quite sharply. Exports to the US grew just 9% in H1, half the 2007 rate. In addition, ICIS news has reported that China’s important textile industry has seen a 25% decline in orders, whilst US polyethylene exports to China are also slowing. And the above chart showing China’s latest Purchasing Managers Index (PMI) indicates the ratio of inventories to new orders has risen 45% since April.

Until recently, rapid growth in most Western housing and auto markets created a virtuous circle for chemical producers worldwide. Not only were these major sources of chemical demand in their own right. But as the blog noted last December, they also enabled an export boom to take place in China, due to its role as the world’s leading manufacturer. In turn, this supported domestic growth and caused China’s own import demand to jump. Now, unfortunately, we may be seeing a vicious circle develop, as slowing Western markets reduce China’s export growth, and hence its GDP growth, in turn reducing its own import needs.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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