The Covid Zero policy enforced by the Chinese communist leadership is not working out as planned for its customers in the West and tonight’s release of the Chinese Manufacturing PMI seems to indicate that the supply chain crisis is indeed about to return this winter with a vengeance.
Needless to say, this contraction was “unexpected” like all economic data recently and should disturb any logical thinker. If one notes that trend since the GFC, Chinese manufacturing really has not experience a major surge towards the 60 level like the old deflationary days which produced cheap consumer goods for Western markets along with inexpensive parts for global manufacturing.
America, over the past decade, recovered faster from the 2007-2009 crash thanks to the deflationary influences of Chinese economic policy. Now, that policy is being revised dramatically.
And noow the bill on the dependency on economic stability from Beijing is coming due.
It would appear that China is going to keep domestic demand tapped down while creating a stagflationary supply chain for export which ultimately creates the inflation American and European consumers are enduring now.
What happens in the months ahead is nothing more than a crap shoot. No one can predict what is next as the global economic and political order is heading into uncharted territory thus the best anyone can do is guess. My guess is a more dramatic repeat of the 1970’s but in a greatly compressed time frame with a global reset of the economic order.