Monday, September 10, 2012

Eye's East

China, that powerhouse economy, has thrown the world a curve-ball. Some saw this coming, as the financial news from the country had turned neutral and then negative in the past few weeks. But like many Pollyannas, reality in the stock markets never set in and predictions of a government-led turnaround were common in manufacturing industry corporate reports to stockholders. The magic elixir of government stimulation, rapidly applied and instantly effective, was expected to turn this situation around. Weeks went by and this did not occur, at least in the short-run which had been the modus operandi since the recession.

Official figures released over the weekend showed only an 8.7% increase in production, the same rate as the country experienced in the recession three years ago. It wasn't as sharp decline as China's economy had been slipping over the last year or so, refusing to react to government moves to turn it around -- and distinctly sending a message of independence from the non-state-owned manufacturing community. Both imports and exports took a hit with the former down 2.6% and the latter growing only a so-so 2.7%. With domestic demand slipping in China, this prolonged situation is not good news especially in countries and companies for whom exports to China may be their life-blood in a near-recession economy.

Among the industrial laser and systems suppliers, this is troubling news. The end of the third quarter is only three weeks away and the anticipated recovery to stronger shipments to the Far East looks questionable. Some analysts see the government's infrastructure stimulus favoring imports in the coming months but there seems to be little support for an instant boom in the economy. That said, it looks like the industry will settle down to modest growth market in China into the new year.

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