Why Chinese economic worries look overdone

WITH investors already in a febrile state of mind about China's slowdown, the latest bits of gloomy news only seemed to confirm their worst fears. A survey showed that its manufacturing sector is on track in August for its weakest month since the dark days of the global financial crisis more than six years ago. Adding to the sense of panic, Chinese stocks plunged another 4% on Friday, closing off one of their worst weeks in years. The sell-off, which has already scorched emerging markets, enveloped developed markets as well; European, Japanese and Australian stocks all fell. Investors, though, are hardly known for taking measured views when markets get topsy-turvy. There is good reason to be anxious about China, but the pessimism is almost certainly overdone.No one doubts that China's factories are struggling. Industrial growth was 6% year-on-year in July, well below the double-digit rates of the not-too-distant past. The manufacturing survey published on Friday suggests that it is likely to slow yet further. New orders, exports and production are all down in August. One-off factors might have added to the troubles: last week's deadly...Continue reading
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