Falling Stock Markets and Economic Indicators makes Chinese Leadership wary

China’s powerful Economic Growth Engine is showing definite signs of a major Moderation.Earlier reports indicated a sharp slowdown in Industrial PMI levels even as a US based Conference Board sharply down revised China’s leading economic indicators.The recent non-manufacturing index reports have been equally bad indicating that China could slowdown in the second half of 2010.The huge increase in monetary base in 2008 and 2009 to counter the Global Financial Crisis has contributed to a real estate bubble.The government is trying to cool down the market through tightening measures which is now starting to get reflected.Currency pressures and the European Crisis has only compounded the Chinese problems.The Leadership is acutely aware of the growing convergence of these negative factors.The Chinese market has been the third worst Stock Market in 2010 with the Market down a huge 28% Year to Date.The recent labor unrest due to wage pressures has only served to unnerve the markets more.Huge IPOs being planned by China’s AgBank has led to a sharp loss in liquidity as well.

China’s HSBC Services Index Slides to 15-Month Low – Bloomberg

A Chinese services industry index slid to a 15-month low in June, adding to signs that the world’s third-biggest economy is cooling.The measure fell for a third month to 55.6 from 56.4, HSBC Holdings Plc and Markit Economics said in an e-mailed statement.The latest services number “reflects the effect of property market tightening measures,” said Qu Hongbin, a Hong Kong-based economist at HSBC. “This, combined with the moderating manufacturing production, implies the economy is cooling off sequentially.”A non-manufacturing index released by the Federation of Logistics and Purchasing on July 3 slid to 57.4 from 62.7 in May.

China’s Stocks Fall to 16-Month Low on Economy, Profit Outlook – Bloomberg

China’s stocks declined, driving the benchmark index to a 16-month low, on concern a slowdown in the world’s third-largest economy and fundraising by banks will dent profits and hurt existing shareholders’ stakes.The Shanghai Composite is the world’s third-worst performing equity market this year with a 27 percent loss on concern tighter rules for the property market and Europe’s debt crisis will slow economic growth. Equities also declined as the nation’s biggest banks announced as much as $45.6 billion in fundraising after extending record loans last year.

Premier Wen Jiabao indicated the huge dillema being faced by the Chinese leadership as the impact of the Global Financial Crisis continues be serious.He said that the reforms in the Chinese economy would continue with increased flexibility.He also reiterated that Chinese economy was on a sound footing even though the domestic and international problems are serious.

Wen Says China Faces Economic ‘Dilemmas’ – WSJ

Chinese Premier Wen Jiabao said Sunday the country’s economic policies “face increasing dilemmas” because the impact of the global financial crisis is more serious than expected, but he reiterated that China won’t hold back steps to restructure the economy for growth.Despite the widely expected slowdown, Mr. Wen reiterated that China will continue its economic policies but increase their flexibility, to “solve current significant and urgent problems” while “laying foundations for stable and relatively fast economic growth of 2011 and in a longer term.” He was speaking at a economic forum held Saturday in the central Chinese city of Changsha, according to a statement posted on the central government’s website.”China’s current economic situation is sound, but the domestic and global economic environment is extremely complicated,” Mr. Wen said. He said Beijing will try to maintain relatively fast economic development while managing inflation.