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China manufacturing reading dips below key 50 level

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The HSBC flash manufacturing index for China was released last night. It dipped below 50 to 48, indicating a contraction in the Chinese economy. It served to aggravate investors' worries about global economic growth.

This reading was the lowest level for the index since March 2009. It had been bouncing around the 50 mark for months now as the Chinese economy cools a bit in response to monetary tightening by the authorities.

HSBC said the reading was no reason for investors to panic as China remains on track for a so-called soft landing for its economy.

And HSBC may be right.

Once you drill down into the numbers, it can be seen that most of the weakness was concentrated in the domestic sector, while exports were still positive.

The good news is that the domestic sector is the easiest for the Chinese authorities to stimulate. Already the government has said it is enacting some economic "fine-tuning."

China does not want to reignite inflation. But it still makes sense for the government to enact some stimulus measures, perhaps aimed at small and medium businesses, to give its economy a bit of a boost.

This in turn should provide positive stimulus for the overall global economy. But for now, as Tim says, this is "nasty." And Europe's numbers are at their worst since July 2009, so stimulus would be welcome.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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