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January’s PMI data for China’s manufacturing sector, as released by Markit Economics and HSBC, showed a marked decline in production activity. More disturbing, however, is their analysis on the individual sectors of the manufacturing economy. 

According to the report, firms cut their staffing levels at the quickest pace since March 2009, and, more importantly, “average production costs declined at a marked rate, while firms lowered their output charges for the second successive month.”

This last part is especially important as it indicates the high probability of the beginnings of a major market correction, as the major monetary inflation that China has been utilizing to stimulate its economy for the past several years is now coming back to haunt it.

In particular, money printing that, typically, enters the economy through the loan markets, tends to stimulate growth in the higher-order manufacturing industries, a result…

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