Chinese manufacturing faces headwinds going into the second half off the year. The Producer Price Index is declining, meaning makers of Made in China widgets are losing their pricing power. This weakness will cause inventory liquidation as companies look to offload stuff they're having a hard time selling due to the trade war, which has induced an unsustainable countercyclical inventory build in China, says Bo Zhuang, the chief China economist for investment research firm TS Lombard.
The trade war has had a mixed impact on China's inventory, but its effect will turn decisively negative in the coming months, Zhuang thinks.
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