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The single, buried statistic that explains China’s slowdown

A labourer pours cement at a construction site for new houses in Huaxi village, Jiangsu province October 8, 2011. As housing bubbles go, China's looks relatively benign. Unlike in the United States, Chinese home buyers typically put down at least 40 percent of the purchase price. That means they don't have to worry about a modest decline wiping out all their equity, and banks have little reason to fear an influx of "jingle mail" from defaulting homeowners returning the keys. To match Insight ECONOMY-CHINA/PROPERTY REUTERS/Carlos Barria (CHINA - Tags: BUSINESS REAL ESTATE EMPLOYMENT CONSTRUCTION)
Reuters/Carlos Barria
Cement production has been going downhill.
Published This article is more than 2 years old.

After a years-long boom, domestic investment is sucking wind in China. For our money, this statistic is a perfect snapshot of the situation. Cement production growth rates in the People’s Republic have slipped sharply in recent months. In August, cement production was up a scant 3% compared with the prior year. (You’ll notice that the data is pocked by lacunae, due to the lunar holidays early in the year.)

At any rate, the current growth rate of cement production is almost as low as it was when the global financial crisis hit in late 2008. And in this slowdown, it’s not just cement. Overall Chinese industrial production grew by 6.9% year-on-year in August, the weakest growth seen since December 2008.

At that time, the Chinese government came sprung into action, launching an investment program that caused a surge of cement to pour forth from Chinese factories in 2009. Cement is worth paying special attention to, given how closely linked it is to the intensely overbuild Chinese housing market. Given that the government is letting the flow of cement slow to a trickle, it suggests any government effort to reinvigorate growth (if there is one at all) will likely sidestep a sector that already seems hopelessly oversupplied.

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