China Business Blog and Podcast

Is it over?  And by “it” I mean the economic tsunami wreaking disaster to the very ends of the earth – when Iceland is the hardest hit, you KNOW it must be bad (maybe I can buy a few vowels from their names … they seem to have a LOT of them and I sure need a few more!).  Well, we are not sure if its over. Heck, we were not even aware of when it “started” so how can we be sure when it is “over”?

Some are calling the Chinese economy “the canary in the coal mine”, a harbinger of the near future (and a kick-butt song by The Police!).  As well they might…things have been moving along OK here lately.  Q1 ended at, I think, the 6.5% growth that the government was predicting – but, then again, it is the government that determines this number so they had a pretty good chance of it being close!  But in March, the Purchasing Managers Index (PMI) in China rose to 52.4%, over a 4% increase over the previous month.  Pointy-headed economists tell us that any PMI reading over 50 suggests that the manufacturing sector is growing again.  This makes China the first major country to record such a good number since the global economy went in the crapper last September.

However, I think we need to be careful here.  Saying that China is a predictor of good things for the global economy suggests a cause and effect relationship that might not be there.  Remember that, because it has been so reliant on exports, China’s economy followed those of the West down the tubes – water skiing behind a speedboat is fun until that boat heads for the bottom of the lake and you can’t let go fast enough!  For China to be a predictor of the global economy’s slow return to health means that China is now the speedboat and everyone else is the hapless skier tied on back.

To a certain extent this might be true.  For example, General Motors – which is now, for all intents and purposes, a State-owned company in the U.S. – is going gang-busters here in China where total car sales reached another record in March.  GM might still be making your grandfather’s Oldsmobile, but that’s what folks are buying here – in fact, GM just announced that they plan on doubling their sales in China in the next five years.  Many of my friends who work at GM are very thankful that they are working here for the company, and not back in the United States of Depression.  But GM’s success in China is not going to prevent them from going into selective receivership in the U.S.  They are not doing THAT well here!

The question is how “deep” are foreign companies augured in here and will they be in a position to catch the China helium-lift as it hits?  For years, we have been preaching that, for many companies, some of their best opportunities for growth are in China.  This was certainly the case when the economy here was growing at a neck-snapping 13% annually.  But the halo factor is still possible, for those that were able to get in and get established.  I have been talking to several companies these last few weeks who have seen NO drop in their business throughout the downturn, even though their parent companies in the U.S. are going through terrible times.  China has been able to sustain through it all!

So while the signs of life in China are good news – particularly for those of us here! – I am going to hold out on saying that this is a broader sign that the global economy is following hot on China’s heels.  We have a saying in the U.S. that “the opera ain’t over ‘till the fat lady sings”.  So far, she is tuning up, but the curtain has yet to rise.

This entry was posted on Tuesday, April 14th, 2009 at 1:40 am and is filed under automotive, China, economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.