China’s Manufacturing falls for the 11th month, Shanghai Index Plunges

China remains as the X-factor amidst all the inflationism deployed by global central banks.

China’s manufacturing continues to go downhill.

From Reuters:

Manufacturing in China contracted for the 11th month in a row in September, according to a private sector survey of factory managers that indicated the world's second largest economy remains on track for a seventh quarter of slowing growth.

The HSBC Flash China manufacturing purchasing managers' index (PMI) showed activity stabilized in September after hitting a nine-month low in August, with the headline reading ticking up to 47.8 from 47.6 last month.

But while the economy may not have worsened, there were few signs of a fast turnaround. Rather, the PMI, which provides the first glimpse of September's conditions for Chinese industry, pointed to a month in which a slide was halted but not reversed.

September's reading extends the longest period that the PMI has been below 50 - the value that separates contraction from expansion - since HSBC began compiling the survey in 2004.

There was a broad steadying across the sub-indexes in the survey, released on Thursday, with the exception of output, which dipped to its lowest level in 10 months.

"China's manufacturing growth is still slowing, but the pace of slowdown is stabilizing. Manufacturing activities remain lackluster, thanks to weak new business flows and a longer than expected destocking process," Qu Hongbin, chief economist for China at HSBC, said in a statement accompanying the survey.

"This is adding more pressure to the labor market and has prompted Beijing to step up easing over the past weeks. The recent easing measures should be working to lead to a modest improvement from Q4 onwards."

Not enough steroids? Again from the same article:

China unveiled a series of measures last week to help stabilize export growth, including faster payment of export tax rebates and boosting loans to exporters.

That was on top of a series of approvals for infrastructure projects worth more than $150 billion, two earlier cuts to interest rates, the easing of bank reserve requirements that freed about 1.2 trillion yuan ($190 billion) for lending and a steady series of liquidity injections into money markets.

Still, purchasing managers in the survey had little cause for premature cheer. A sub-index that measures output fell to 47.0, its lowest level since November 2011.

After spending several months bumping just beneath the crucial 50 mark, the overall PMI index is now at a level rarely seen since the 2008-2009 global financial crisis.

Asian markets have not seen this as anything to cheer about

China’s equity markets continue to hemorrhage with the Shanghai Index sharply down today by 2.08%  (table from Bloomberg)

Today’s steep decline means that the recent lows of around 2040+s will be tested (chart from stockcharts.com)

These developments brings some questions to mind:

Will Chinese political authorities up the ante of policy bailouts through fiscal and monetary channels or will they allow the markets to clear? My bet is on the former.

Will developments in China weigh on global markets or will inflationism eventually diffuse to China.  This is something to be yet determined.