China Manufacturing Expands to 19-Month High!

The HSBC China Manufacturing Purchasing Managers' Index, compiled by Markit, increased +1.0 to 51.5 in December, well above the 41-month low of 47.6 in August 2012. That was the lowest since March 2009.

This is the second consecutive month of expansion (greater than 50.0), after 12 consecutive months of contraction (less than 50.0) from November 2011 to October 2012. The China Manufacturing PMI has been just below 50 for 15 of the past 18 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. Manufacturing has now been expanding since October 2012. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China Co-Head of Asian Economic Research at HSBC, said: "December’s final manufacturing PMI picked up for the fourth consecutive month to a 19 month high, thanks to the faster new business flows and the end of destocking. Such a momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilise. This, plus Beijing’s reiteration of keeping pro-growth policy in place into the coming year, should support a modest growth recovery of around 8.6% y-o-y in 2013, despite the ongoing external headwinds."

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends have reversed and are now rising. The PMI is a percentage - not a total.



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China LEI Increases: "Economic rebound still appears fragile"

The Conference Board: China Monthly Leading Economic Index

China Monthly LEI

The current November 2012 reading is a post-recession high.



“Strength in China’s current economic activity has been maintained in November and all of the components in the Coincident Economic Index now posted gains,” says Andrew Polk, resident economist at The Conference Board China Center in Beijing. “However, growth in the leading index decelerated slightly as real estate activity, consumer confidence and new export orders all contributed less to LEI growth in November than in October. Credit creation in the banking system remains the only consistent positive contributor to the LEI since early 2011. As a result, the sustainability of a broad based economic rebound still appears fragile heading into 2013.”

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China Manufacturing Expands to 14-Month High

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +0.4 to 50.9 in December, well above the 41-month low of 47.6 in August 2012. That was the lowest since March 2009. This is the second expansion (greater than 50.0) since October 2011 (51.0). There had been 12 consecutive month below 50, which indicates sector contraction, from November 2011 to October 2012. The China Manufacturing PMI has been just below 50 for 15 of the past 17 months.

China Manufacturing PMI by Month Manufacturing began expanding, an Index reading of greater than 50, in November 2012. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



HongbinAs December flash manufacturing PMI picked up further to a 14 month high, it confirmed that China's ongoing growth recovery is gaining momentum mainly driven by domestic demand conditions. However, the drop of new export orders and the downside surprise of November exports growth suggest the persisting external headwinds. This calls for Beijing to keep an accommodative policy stance to counter-balance the external weakness, provided inflation stays benign”

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends have reversed and are now rising. The PMI is a percentage - not a total.



The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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China Manufacturing Rebounds in November

The HSBC China Manufacturing Purchasing Managers' Index, compiled by Markit, increased +1.0 to 50.5 in November, well above the 41-month low of 47.6 in August 2012. That was the lowest since March 2009. This is the first expansion (greater than 50.0) since October 2011 (51.0). There had been 12 consecutive month below 50, which indicates sector contraction, from November 2011 to October 2012. The China Manufacturing PMI has been just below 50 for 15 of the past 17 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "The final November manufacturing PMI stood at a 13-month high of 50.5 on increasing new business and expanding production. This confirms that Chinese economy continues to recover gradually. We expect GDP growth to rebound modestly to around 8% in 4Q as the easing measures continue to filter through.”

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends have reversed and are now rising. The PMI is a percentage - not a total.



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China Manufacturing Rebounds to 13-Month High

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +0.9 to 50.4 in November, well above the 41-month low of 47.6 in August. That was the lowest since March 2009. This is the first expansion (greater than 50.0) since October 2011 (51.0). There had been 12 consecutive month below 50, which indicates sector contraction, from November 2011 to October 2012. The China Manufacturing PMI has been just below 50 for 15 of the past 17 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "As November’s flash reading of HSBC manufacturing PMI bounced back to the expansionary territory for the first time in 13 months, this confirms that the economic recovery continues to gain momentum towards the year end. However, it is still the early stage of recovery and global economic growth remains fragile. This calls for a continuation of policy easing to strengthen the recovery.”

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends have reversed and are now rising. The PMI is a percentage - not a total.



The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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China LEI Surges: "Moderate rebound underway"

The Conference Board: China Monthly Leading Economic Index

China Monthly LEI

The current October 2012 reading is a post-recession high.



“The LEI picked up momentum in October, suggesting a moderate rebound is underway that may carry into the first half of 2013,” says Andrew Polk, resident economist at The Conference Board China Center in Beijing. “Growth was driven primarily by renewed real estate activity and upbeat consumer expectations, two areas which have been highly volatile in recent months. As such, the strength and sustainability of the economy’s acceleration remains questionable. Meanwhile, the CEI showed its strongest and broadest growth in several months, aligning with a raft of recent data suggesting that the cyclical slowdown, which began in the second half of 2011, has likely passed its trough.”

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China Manufacturing Contracts for 12th Consecutive Month: "Conditions deteriorate at marginal pace"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +1.6 to 49.5 in October, above the 41-month low of 47.6 in August. That was the lowest since March 2009. A contraction was expected and ongoing slowdowns are projected. This is the 12th consecutive month below 50, which indicates sector contraction. The China Manufacturing PMI has been just below 50 for 15 of the past 16 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "October’s final PMI rose to an eight-month high, implying that China’s industrial activity continues to bottom out following a modest pickup last month. This is mainly driven by the increase of new orders, thanks to the filteringthrough of the earlier easing measures, while exports outlook remains challenging. We expect a continuation of policy easing to further boost domestic demand and counterbalance the external weakness, leading to a gradual growth recovery in the coming quarters".

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends continue downwards. The PMI is a percentage - not a total.



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Baidu Earnings Review: Performance Rises to Another Record!

Baidu reported QE September 2012 financial results on October 29

Baidu met the lower end of their Q3 revenue guidance (actual RMB6.251 vs. projected RMB6.245) and reported record quarterly total revenues, operating income, net income, cash flow per share, and earnings per share. Gross, operating, and net margins continue above historical averages. Financial position is strong and liquid.

Although record performances continue to be reported and projected, the YoY growth rates for total revenues and earnings per share are slowing. The 10-quarter averages have been an incredible +76% and +98%, respectively. For the current Q3 these were +50% and +60%, respectively, which most companies and investors dream about. These historical growth rates are apparently impossible to maintain, even for Baidu.

Baidu Outlook CEO Robin Li and CFO Jennifer Li are estimating a possible record Q4 revenues of RMB6.155 billion to RMB6.345 billion. This ranges from a QoQ possible decrease of -1.54% to a possible QoQ increase of +1.50%. This is an increase of 38% to 42% YoY but yet a continuing downtrend in long-term growth. That is how spectacular Baidu's growth has been, even though YoY revenue growth is slowing it is still vastly superior to mere mortal companies.







"We are pleased to report a solid performance for the third quarter driven by encouraging customer growth and improvements to our monetization platform," said Robin Li, chairman and chief executive officer of Baidu. "During the quarter, we worked to improve user experience by more closely integrating Baidu's suite of market-leading vertical products with Web search," continued Mr. Li. "Mobile and cloud represent our vision for the future of China's Internet, and Baidu will continue to proactively drive the development of this crucial ecosystem. We stand ready to meet the challenges and capture the opportunities the PC-to-mobile transition presents."

Jennifer Li, Baidu's chief financial officer, commented, "In the third quarter, we saw solid profitability as we continued our strategy of investing in key areas of future growth, particularly mobile and cloud. In the quarters ahead, we will look to accelerate the pace of investment to achieve long-term, sustainable growth."

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China LEI Edges Up: "Near-term outlook continues to be uncertain"

The Conference Board: China Monthly Leading Economic Index

The September 2012 China Monthly Leading Economic Index rose a slight +0.3 and +0.29% to 241.2 (preliminary), another post-recession high. The China Monthly Coincident Economic Index increased for the 5th consecutive month. Overall, continuing economic growth is forecast, but volatility and uncertainty has increased.

China Monthly LEI The current September 2012 reading is a post-recession high.



Andrew Polk, resident economist at The Conference Board China Center in Beijing, said "The LEI’s very modest pickup in September, due in large part to a heavy drag from real estate, points to an economy that is unlikely to pick up rapidly in the near term. Credit extension and some tentative stabilization in the manufacturing sector buoyed the index – along with slightly improved export orders going into the West’s holiday season."

"The real estate sector’s strong performance in August does not appear to have extended into September, a traditionally strong month for real estate transactions. Sharp increases in government-sponsored infrastructure spending should continue in the coming months, helping to support industrial and manufacturing activity, even as real estate activity remains weak. These volatile movements illustrate that the near-term outlook continues to be uncertain."

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China Manufacturing Contracts for 12th Consecutive Month: "External Challenges"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +1.2 to 49.1 in October, above the 41-month low of 47.6 in August. That was the lowest since March 2009. A contraction was expected and ongoing slowdowns are projected. This is the 12th consecutive month below 50, which indicates sector contraction. The China Manufacturing PMI has been just below 50 for 15 of the past 16 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "October’s flash PMI reading continues to recover for the second month, thanks in part to a gradual improvement in the new orders index which picked up to a six-month high (albeit marginally below 50). This is helped by the filtering-through of the earlier easing measures. However, external challenges are still abound and the pressures on job market are lingering. This calls for a continuation of policy easing in the coming months to secure a firmer growth recovery".

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends continue downwards. The PMI is a percentage - not a total.



The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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China Manufacturing Slowdown Confirmed: "Sharper contraction of new export orders"

The HSBC China Manufacturing Final Purchasing Managers' Index, compiled by Markit, increased +0.3 to 47.9 in September, just above the 41-month low of 47.6 in August. That was the lowest since March 2009. New export orders plunged at the fastest rate in 42 months. A contraction was expected and ongoing slowdowns are projected. This is the 11th consecutive month below 50, which indicates sector contraction. The China Manufacturing PMI has been just below 50 for 14 of the past 15 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "Chinese manufacturing growth is likely to be bottoming out. However, the sharper contraction of new export orders and the lingering pressures on job markets mean that Beijing should step up easing to support growth and employment. Fiscal measures should play a more important role in the coming months."

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends continue downwards. The PMI is a percentage - not a total.



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China LEI Spikes: "Raises expectations for moderate rebound in growth"

The Conference Board: China Monthly Leading Economic Index

The August 2012 China Monthly Leading Economic Index rose a strong +4.0 and +1.69% to 240.4 (preliminary), another post-recession high. The China Monthly Coincident Economic Index increased for the 4th consecutive month. Overall, continuing economic growth is forecast, but volatility and uncertainty has increased.

China Monthly LEI The current August 2012 reading is a post-recession high.



Andrew Polk, resident economist at The Conference Board China Center in Beijing, said "The improvement in the China LEI in August raises expectations for a moderate rebound in growth, even as current economic conditions remain subdued. The LEI’s largest increase in seven months was primarily due to a rebound in real estate activity, with strong credit growth and an improvement in consumer expectations also adding to the uptick. The manufacturing and trade sectors continued to underperform. Despite the somewhat improved outlook, recent LEI trends suggest the rebound in real estate may be tenuous and uncertainty around credit-led growth remains a concern."

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Corporate Accounting: Can You Trust China?

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Can You Trust China?

Steve Orlins, National Committee on U.S.-China Relations, explains why corporate accounting in China should not to be trusted. CNBC's Jeff Cox joins the discussion.

China’s Corporate Governance Draws More Fire

HONG KONG (MarketWatch) — Concern over Chinese corporate governance is growing, with one major Hong Kong brokerage warning of increased risks of corporate fraud as the economy slows, and a noted investor casting doubt on China’s accounting.

CLSA head of Asia research Amar Gill said he was concerned that many of China’s publicly listed companies could undergo an increase in abuses, with the potential for some insiders to drain such companies of cash as if they were personal ATM machines.

Gill warned financial strains weighing on individual investors could result in cases where “controlling shareholders will use listed companies to bail out their private interests.” Gill made the remarks at a news conference to announce the results of CLSA’s 2012 report on corporate governance in Asia.

In the report, China ranked ninth of 11 markets tracked for the year, trailing behind South Korea, but ahead of the Philippines and Indonesia. China scored 45 on the 100 point scale, slipping 4 points from its previous ranking, completed in 2010.

“While economic conditions are still tough, you have more likely a negative scenario for corporate-governance surprises, and so if I had to guess for the next year, more likely than not, the average score for Chinese companies will be slightly lower,” Gill said.

The report, conducted in association with the Asia Corporate Governance Association (ACGA), examined 864 companies listed on markets within the Asia-Pacific region. Singapore ranked highest, followed by Hong Kong, Thailand and Japan.

Jamie Allen a representative from the ACGA, said there were also instances where Chinese companies were able to use state-secrecy laws to shield their books from scrutiny. He said the rules were at odds with the need for independent scrutiny of publicly listed companies. “Should a company be listed if auditors are not allowed to do their job?” Allen asked.

The report coincided with sharp criticism of Chinese corporate and government data by famed short-seller and head of Kynikos Associates, Jim Chanos.

Chanos told CNBC in an interview that he sees Chinese economic data as inaccurate and often manipulated, with corporate numbers equally unreliable, echoing longstanding criticism among some investors.

“I would take issue with almost any corporate accounting in China. It is that bad,” Chanos said.

He said Western capital flowing into China was unlikely to return, describing the nation as “a classic emerging-market Roach Motel, except it’s a really big one. ... It’s very difficult to earn adequate returns for capital and get your capital back,” he said.

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China Manufacturing Contracts for 11th Consecutive Month: "Remains lackluster"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +0.2 to 47.8 in September, just above the 41-month low of 47.6 in August. That was the lowest since March 2009. A contraction was expected and ongoing slowdowns are projected. This is the 11th consecutive month below 50, which indicates sector contraction. The China Manufacturing PMI has been just below 50 for 14 of the past 15 months.

China Manufacturing PMI by Month Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "China’s manufacturing growth is still slowing, but the pace of slowdown is stabilising. Manufacturing activities remain lacklustre, thanks to weak new business flows and a longer than expected destocking process. And this is adding more pressures to the labour 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 4Q onwards.”.

China Manufacturing PMI Moving Averages The short, intermediate, and long-term trends continue downwards. The PMI is a percentage - not a total.



The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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China Manufacturing Contracts for 10th Consecutive Month: "Intensifying downward pressure"

China Manufacturing PMI by Month



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "The final reading of the HSBC manufacturing PMI (August) confirmed that China's manufacturing sector still faces intensifying downward pressure. New export orders contracted at the fastest pace since March 2009, this, combined with a record high in stocks of finished goods sub-index, and a 41-month low employment index, suggests China's exporters are facing increasing difficulties amid stronger global headwinds. Beijing must step up policy easing to stabilize growth and foster job market conditions".

China Manufacturing PMI Series Moving Average



Chinese Job Losses Continue "Staff numbers in the Chinese goods producing sector decreased during August, with the rate of job shedding the fastest in 41 months. The latest decrease in headcounts was the sixth in as many months. Reduced employment in part reflected falling new order volumes."

China LEI Rises: "Main driver was government loans"

The Conference Board: China Monthly Leading Economic Index

China Monthly LEI The current July 2012 reading is a post-recession high and an increase in the growth rate.



Andrew Polk, resident economist at The Conference Board China Center in Beijing, said "The Conference Board LEI for China increased again in July. The main driver was government loans to boost banks in financing infrastructure investment. Falling prices gave an important boost to loan growth, as the latter was measured in real terms. The small increase in the CEI, a measure of current conditions, reflects some improvement in industrial production, retail sales and electricity production, suggesting that current economic conditions are stabilizing. Although other leading indicators, such as real estate, exports and consumer sentiment, remained weak through July, the leading and current indicators point to a modest rebound in the second half of 2012."

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China Manufacturing Shrinks: "Struggling with strong global headwinds"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, decreased -1.5 to 47.8 in August, a 9-month low. A contraction was expected and ongoing slowdowns are projected. This is the 10th consecutive month below 50, which indicates contraction.

The reading is just above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been just below 50 for 13 of the past 14 months.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now decreasing. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "Falling orders dragged down the August flash PMI to a nine-month low, suggesting Chinese producers are still struggling with strong global headwinds. To achieve the stated policy goal of stabilizing growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months".



The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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China Manufacturing Contracts: "External markets continuing to deteriorate"

The HSBC China Manufacturing Purchasing Managers' Index, compiled by Markit, indicated ongoing manufacturing contraction in July. The PMI did increase +1.1 to 49.3, a 5-month high, which indicates a slowing of the contraction.

The reading is above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been below 50 for 9 consecutive months and for 12 of the past 13 months.

Another PMI, by the Chinese Federation of Logistics and Purchasing, dipped -0.1 to 50.1 in July, indicating near stagnation. This contradicts the HSBC China PMI. What to make of this? How about averaging them. The two contrasting PMI’s averaged together are 49.7, which indicates a slight contraction for China manufacturing. There has been some recent questioning of the CFLP PMI being overstated.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now level. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "Final manufacturing PMI confirmed only a modest improvement of manufacturing conditions thanks to the initial effect of the earlier easing measures. But this is far from inspiring, as China’s growth slowdown has not been reversed meaningfully and downside pressures persist with external markets continuing to deteriorate. We still expect Beijing to step up policy easing in the coming months to support growth and employment".



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China Manufacturing Contracts: "Demand still remaining weak"

The HSBC China Manufacturing Flash Purchasing Managers' Index, compiled by Markit, increased +1.3 to 49.5 in July, a 5-month high. A contraction was expected and ongoing slowdowns are projected. This is the 9th consecutive month below 50, which indicates contraction.

The reading is above the 32-month low of 47.7 in November 2011. An index reading above 50 indicates an overall increase in manufacturing. The China Manufacturing PMI has been just below 50 for 12 of the past 13 months.

China Manufacturing PMI Manufacturing began contracting, an Index reading of less than 50, in July 2011. The chart peak was 55.3 in November 2010. The short, intermediate, and long-term trends are now level. The PMI is a percentage - not a total.



Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said: "July's headline PMI picked up modestly to a five-month high of 49.5, suggesting that the earlier easing measures are starting to work. That said, the below-50 July reading implied demand still remaining weak and employment under increasing pressure. This calls for more easing efforts to support growth and jobs. We believe the fast falling inflation allows Beijing to do so and a more meaningful improvement of growth is expected in the coming months when these measures fully filter through".



The HSBC Flash China Manufacturing Purchasing Managers’ Index™ (PMI™) is published on a monthly basis approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China. The estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate indication of the final PMI data.

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