So, after $1 trillion in new credit, numerous RRR cuts, a devalued currency (great for exporters, right?), and the domestic exuberance of a housing bubble, China’s economy (manufacturing and non-manufacturing) collapsed to cycle lows (weakest since Dec 08) in February. Of course, this plunge after January’s bounce is all being blamed on the Lunar New Year… and in fact, according to The NBS, manufacturing confidence is increasing (seriously that’s what they said!)

• *CHINA MANUFACTURING PMI AT 49.0 IN FEB. (49.4 EXP.)
• *CHINA NON-MANUFACTURING PMI AT 52.7 IN FEB.

Does this look like “confidence” to you?

So to be clear – China Services PMI went from the highest since June 2014 to the lowest since Dec 2008 in one month.

It appears a trillion dollars doesn’t go as far as it used to.

One can’t help but wonder, following these comments from PBOC’s Chen…

• *WE HOPE TO COMMUNICATE CANDIDLY WITH FED: PBOC’S CHEN
• *CHINA, U.S. CENTRAL BANKS SHOULD IMPROVE COORDINATION: CHEN
• *STRONG DOLLAR CYCLE MAY TRIGGER CRISIS IN EMERGING MKT: CHEN

Whether this is some Fed-targeted dumping of bad data to allow turmoil and force The Fed to relent.

The data deluge continued to get worse as Caixin/Markit reported:

• *CHINA FEB. CAIXIN MANUFACTURING PMI 48; EST. 48.4 (5 MONTH LOWS)

“The Caixin China General Manufacturing PMI for February is 48, down 0.4 points from the previous month. The index readings for all key categories including output, new orders and employment signalled that conditions worsened, in line with signs that the economy’s road to stability remains bumpy.”

Staff numbers declined at the sharpest rate since January 2009 during February. Companies that recorded lower headcounts widely commented on company downsizing policies as part of cost-cutting initiatives, along with the non-replacement of voluntary leavers. Despite lower employment, manufacturers were able to work through outstanding business during February. Though marginal, it was the first reduction in the level of work-in-hand since April 2015.

The government needs to press ahead with reforms, while adopting moderate stimulus policies and strengthening support of the economy in other ways to prevent it from falling off a cliff.”