As we have written HERE – the U.S. has experienced “the longest stretch of employment gains in manufacturing in almost two decades”.  Even though the American economy is growing slowly … it is growing.  There have been many “green shoots” in the economy from housing to autos to manufacturing.  America has had to learn how to transition from the post-bubble, post-recession economy in a strong, sustainable way.  There usually aren’t any easy solutions and building a stronger American economy that’s built to last has shown to take some time.  It would certainly help if Republicans weren’t trying to completely sabotage the country for political gain but at the end of the day – we’re putting the right foot forward and then the left foot forward … we’re moving.

Comparing China’s nearly full year contraction in the manufacturing industry to America’s growth of over 500k manufacturing jobs in the past two years is a major first step achievement; America just needs to push forward while we have the opportunity to outcompete China.  We should not view China as an enemy or in hostile ways; they are trying to boost employment through a various number of ways … many of which are against fair trade practices.  It isn’t to hurt us … Chinese leaders feel pressure to deliver on their promises of better quality of living and opportunity for the Chinese people.  President Obama (like President Bush) has won most of the WTO trade cases where there were disputes on trade policy (source); the Obama administration has been pretty aggressive on this in many ways from chicken parts to auto tires.

We want to see a prosporous China (we want them to buy American products) but not at the expense of American workers and not if America is trying to compete in an environment where the Chinese are rigging the game.  And for the first time in a decade – America is seeing a new revival (albeit small) in manufacturing jobs while China can’t seem to put all the pieces together.  A win is a win.

Bloomberg has got the news on China HERE:

China’s manufacturing contracted for an 11th straight month, a private survey found, increasing pressure on the government to bolster growth in the world’s second-largest economy.

The purchasing managers’ index from HSBC Holdings Plc (HSBA) and Markit Economics had a final reading of 47.9 for September, compared with 47.6 in August and a preliminary level of 47.8 released Sept. 20. New export orders declined in September at the fastest pace in 42 months and purchasing activity in manufacturing fell for a fifth consecutive month.

The data add to challenges for Chinese leaders who are preparing for a once-a-decade handover of power that begins in November and also trying to balance the priorities of growthwith avoiding a resurgence in home prices. Speculation that authorities will take steps to counter a deepening slowdown spurred a 4.1 percent surge in the benchmark Shanghai Composite Index in the week’s final two trading days.

Anything on the index below 50 would represent a contraction in the economy in that industry …. 11 months in a row now.  Global Economic Analysis shows the trends for China’s manufacturing industry HERE; the trend is going the wrong way for them as you can see:

Then there is this – as Global Economic Analysis shows HERE:

The Wall Street Journal says HERE:

China has taken a series of measures over the past several months to support growth, but many economists say the government’s reaction to the slowdown has been less intense than expected, possibly due to fear of a rebound in inflation or property prices.

In the most recent move, the General Administration of Customs on Friday announced a series of measures to stimulate trade growth, including scrapping some customs charges and simplifying procedures for trade companies.

Economists have had a growing concern over a China “hard landing” which would be a disaster for the world economy.  The Financial Times explains why that’s significant HERE:

Some analysts are starting to contemplate what a Chinese “hard landing” would  mean for the country and the rest of the world at a time when Europe is mired in  crisis and the US economic engine is stuttering.

“A hard landing in China would look like the fourth quarter of 2008 and the  first quarter of 2009 when exports collapsed, factories had no orders and  migrant workers were laid off by the tens of millions,” says Wang Tao, an  economist at UBS. “That hasn’t happened yet and probably won’t unless Europe  falls apart or there’s a serious problem in the real estate market.”

Investment in real estate accounted for more than 13 per cent of China’s  gross domestic product in the first half of the year and the sector has been a  key growth driver for most of the past decade.

But forests of empty apartment blocks cover much of the country and land  purchases for new residential housing were down 24.3 per cent in the first seven  months from the same period a year earlier, suggesting future investment will  not hold up.

In short – a “hard landing” on the Chinese economy would not be good for America.  We’re all tied together and we should not wish to see a slowdown in the Chinese economy any more than we wish to see a slowdown in the European economy.  CNBC explains what we can expect to see with China’s economy HERE:

Beijing has pledged economic growth this year will meet a 7.5 percent. Still, some market observers expect China’s growth to sink below 7 percent, a psychological barrier that would have serious implications for the world’s economy. A slowdown could bleed into emerging markets that have thrived on the back of a surging Chinese economy.

“Our baseline is that China will slow to 6.5 percent to 7 percent,” Pimco’s Mohamed El-Erian told CNBC’s “Squawk Box” on Friday, adding that emerging market indicators “are pricing in lower growth” in China.

Cato’s Dorn still believes Beijing can deliver on growth above 7 percent. However, he warns of trouble ahead. Loose monetary policy in both the U.S. and euro zone may put pressure on China to do the same by loosening the reserve requirement ratio (RRR) for its lenders – something it can ill-afford as it battles rising prices.

But China has tremendous inflation and they require 7.5% growth in order to sustain the economy.  If they were to reach 3% growth … once you factor in inflation – it would be a disaster for them.

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