China Macroeconomics & Academia

Christopher Balding

Macroeconomics

<p>The uniqueness of the current economic environment in China with the coronavirus requires us to readjust all our standard frameworks.  There are so many caveats and potential changes to data, we need to tread carefully about how to interpret the data. What we are seeing is that while the larger manufacturing operations that continue throughout Chinese New Year appear to have large kept production unchanged, they are likely nearing the limit of what can be sustained.  Inventories are building up very rapidly and significantly in excess of what is typical. Given the tied up financial capital and the expectation this will move off into construction projects which seems unlikely over roughly the next month it remains to be seen how Chinese business will manage these increasing dilemmas.</p>

The uniqueness of the current economic environment in China with the coronavirus requires us to readjust all our standard frameworks.  There are so many caveats and potential changes to data, we need to tread carefully about how to interpret the data. What we are seeing is that while the larger manufacturing operations that continue throughout Chinese New Year appear to have large kept production unchanged, they are likely nearing the limit of what can be sustained.  Inventories are building up very rapidly and significantly in excess of what is typical. Given the tied up financial capital and the expectation this will move off into construction projects which seems unlikely over roughly the next month it remains to be seen how Chinese business will manage these increasing dilemmas.

Interpreting January PMI in Light of Coronavirus