24/7 Wall St.

China’s manufacturing economy improved slightly in April, but is still in rough sharp. The HSBC Flash Purchasing Managers Index (PMI) was 49.1 in April. That is up from 48.3 in March. Any number below 50 means the sector is contracting.

It is not possible to identify the exact reason for the problem, but it falls within only a few possibilities. The first is that the growing recession in the EU, the world’s largest region by GDP, has crippled China’s exports. The other is that consumer spending within China has slowed along with its overall economy. This second reason will cause the People’s Republic a host of issues. Millions of people continue to move from rural areas into cities to be factory workers. Many of these workers expect higher wages. Manufacturing companies with slowing sales cannot pay those higher wages without sharply lowering their margins, or operating at losses.