This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

The Looming China Crisis Is About to Hit

NEW YORK ( TheStreet) -- China can't hide the real numbers anymore. Manufacturing has been contracting for about 11 months. Export growth is rapidly slowing. Real estate sales and prices have collapsed in some areas, with declines of as much as 50%.

On Friday, economic statistics out of China confirmed my bearishness of the past 12 months. Here is what we heard:

July export growth was close to zero. Outbound shipments increased only 1% year-over-year versus a 11.3% rise in June. These numbers suggest a screeching slowdown in exports.

Industrial output rose the least since the crisis in 2009 in spite of the government's new investment projects.

China's economy has now decelerated for seven consecutive quarters (21 months). That's almost two years. The rebound after the 2009 crisis, fueled by massive money injections, has fizzled.

As a result of these numbers, some previous China bulls now say China's government has to relax monetary policy quickly in order to avoid a "hard landing."

Until now the bulls refused to even consider a weaker economy, or at minimum stated there would be a "soft landing." My reply was, only if "soft" means in quicksand and mud.

There is nothing that lower interest rates or a drop in bank reserve requirements in China can do to boost orders from Europe. The huge export slowdown is a killer for an economy that's export driven. Lower interest rates won't increase European demand for Chinese products. Europe is now on its way to a deep recession, or worse.

During China's great growth period over the past decade, it was cheap labor and large foreign investments that allowed the government to undertake huge infrastructure projects. But the consumer was totally neglected. In fact, growth was financed by sacrificing the individual. Interest rates on savings were very low, benefiting party officials and well-connected firms who took this cheap money for speculation.

Now China wants to boost consumer demand because demand from abroad is declining. But the consumer is still very poor, and the speculators are going bankrupt. CEOs of large companies that can't repay the debt are fleeing, disappearing overnight.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs