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China Manufacturing Slowdown Not Enough to Cause "Double Dip"

The China manufacturing sector expanded at the slowest rate in 17 months in July, showing the government's efforts to tighten lending is weighing on the country's economy. But the Asian juggernaut is still posting strong enough growth to keep the rest of the world out of a "double dip" recession.

The HSBC China Manufacturing Purchasing Managers' Index released Sunday showed activity fell to 49.4 in July from 50.4 in June. A reading above 50 signals expansion, indicating manufacturing activity actually contracted for the first time since China's economic recovery began.

The HSBC PMI's reading was the first below 50 since March 2009. Measures of output, orders and export orders all showed contractions. Another measure, the official government PMI released yesterday (Monday), fell to 51.2 in July from 52.1 in June, the third straight month it has declined.

"We're in a moderate slowdown, not a double-dip," Ken Peng, a Beijing-based economist for Citigroup Inc. (NYSE: C) told Bloomberg News.

Similarly, HSBC Holdings plc (NYSE ADR: HBC) economist Qu Hongbin said China is having a "slowdown not a meltdown" and "there is no need to panic."

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Buy, Sell or Hold: Peabody Energy Corp.'s (NYSE: BTU) Global Dominance Is Heating Up Profit Growth

While advanced economies are still facing high levels of unemployment, more than a billion people in emerging markets are experiencing advancing standards of living.

As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.

This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.

The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.

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China Leapfrogs Japan and is Now the World's No. 2 Economy – And is Gunning for the No. 1 United States

As the old Avis rental car slogan used to say: "When you're No. 2, you try harder."

With the growth rates that its economy has turned in the past few years, no economist could ever accuse China's leader of not trying hard. China now claims to have jumped over Japan to take over the No. 2 spot in the world economic pecking order.

China's next target: The No. 1 U.S. economy.

In fact, some experts believe that China could catch up to the United States' $14.4 trillion economy in as little as 10 to 15 years.

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Fighting to Feed the Dragon: McDonald's Vs. Yum!

Speed kills. And in the fast food industry, it's imperative.

The speed of service and the ability to quickly adapt menus, packaging and advertising are what makes a market leader. And right now, the speed at which fast food companies make the transition into foreign markets, particularly China, is what matters most of all.

The industry's two biggest players, McDonald's Corp. (NYSE: MCD) and Yum! Brands Inc. (NYSE: YUM) - the parent company of KFC, Pizza Hut, and Taco Bell - know that.

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Dr. Copper's Diagnosis: A Strong Recovery

As stocks have slipped lower over the last three months, copper has bucked the broad trend and broken the pattern of lower highs and lower lows it set in the spring.

After bottoming on June 7, the iPath Dow Jones-UBS Copper Subindex Total Return ETN - which closely tracks copper futures - has gained more than 12.2%. In the same span, the Russell 2000 small cap stock index has lost 0.6%.

The red metal is nicknamed Dr. Copper for its ability to peer around the corner and act as a leading indicator for the global economy. And right now, the commodity with a Ph.D. in economics seems to be saying the future looks bright. Is the trend set to continue?

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Gold Will Hit $5,000 an Ounce Long Term … But the Near-Term Profit Prospects Are Even Bigger

Longtime commodities guru Peter Krauth touched off a real media buzz earlier this year when he publicly predicted that gold would hit $5,000 an ounce in the next few years - a projection he stands behind.

But here's the irony.

While Krauth's prediction would represent a total return of about 320% over that multi-year span, he says the potential returns on some of the near-term profit plays he's looking at are even bigger.

"These near-term opportunities are significant because the companies that explore and/or produce gold are leveraged to the price of gold," Krauth said in an interview with Money Morning. "So a 10% to 20% rise in gold's price could cause the share prices of some of these firms to gain 20% to 60% - or more - in a matter of months."

To see why gold is set to soar, read on...

Taipan Daily: Reasons to sell in the aftermath of the Agricultural Bank of China IPO

In the aftermath of the $19 billion Agricultural Bank of China IPO, the dragon is struggling… and there are plenty of reasons to consider selling. A few months back we broke down the major China ETFs – FXI, HAO and PGJ. (You can access that piece here.) Today the technical and fundamental picture looks bearish […]

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Money Morning Mid-Year Forecast: Why China's Economy Will Exceed Expectations in the Second Half of 2010

The rapid growth China's economy experienced in the first half of the year was a blessing and a curse. It helped propel the world out of a disastrous recession, but it forced policymakers into action to prevent overheating - which scared off many investors.

But the fact is that while most of the world was struggling to keep the engine of economic recovery from sputtering to a halt, China spent the first half of 2010 with its foot on the brake. And now that the Red Dragon has reigned in growth, the second half of 2010 will likely look very different from the first.

Money Morning Chief Investment Strategist Keith Fitz-Gerald says nearly everyone felt the first quarter's 11.9% growth in Chinese gross domestic product (GDP) was "too hot." But the 10.3% growth China saw in the second quarter will likely be topped in the second half.

The reasons for that are simple:

"From an investment perspective, the single biggest concern right now is how hard and for how long the Chinese government will keep tapping on the brakes," says Fitz-Gerald. "I personally don't think it's going to be too much longer - an easing sometime in the third quarter now seems realistic."

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"A New Age in the History of Energy" as China Tops the U.S. in Consumption

China, powered by years of surging economic growth, is now the world's largest energy consumer, bumping the United States from the top spot for the first time in more than a century, according to new data from the International Energy Agency (IEA).

China consumed 2.25 billion tons of oil equivalent last year, or about 4% more than the United States, which burned through 2.17 billion tons of oil equivalent. China's total energy consumption was just half that of the United States a decade ago.

"The fact that China overtook the U.S. as the world's largest energy consumer symbolizes the start of a new age in the history of energy," IEA chief economist Fatih Birol told The Wall Street Journal. The United States had been the world's biggest overall energy consumer since the early 1900s, he said.

China was expected to become the biggest energy consumer in 2015, but the economic meltdown and green energy programs in the United States accelerated the transition, Birol said.

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China Stockpiling Uranium in Rush to Build More Nuclear Plants

China is stockpiling uranium and purchasing the yellow metal in unprecedented quantities as part of its effort to build new nuclear reactors and provide electricity for its power hungry populace.

The nation may purchase about 5,000 metric tons of uranium this year, more than twice as much as it consumes, Thomas Neff, a physicist and uranium-industry analyst at the Massachusetts Institute of Technology in Cambridge, said in a July 6 telephone interview with Bloomberg News.

India and China are gearing up for the biggest expansion of nuclear energy since the 1970s oil crisis to cut pollution and supply their economies with enough fuel to keep them growing twice as fast as Europe and North America.

"They are essentially stockpiling in anticipation of new reactor build," said Neff, who is an independent director of GoviEx Uranium Inc., a privately held exploration company with interests in Niger. "They are stockpiling like crazy."

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Google Hangs On To China, but It's Too Late to Make up Profit Losses

Google Inc. (Nasdaq: GOOG) announced Friday that China renewed its Internet license to operate a Web site, but the previous months of tension have already damaged Google's chance at mainland profitability.

Google's chief legal officer David Drummond posted the announcement on the company's blog Friday morning.

"We are very pleased that the government has renewed our ICP license," Drummond wrote, referring to Internet content provider license. "And we look forward to continuing to provide Web search and local products to our users in China."

The license renewal should dissipate - at least, temporarily - months of tension that started earlier this year when Google claimed China was the source of cyber attacks on its databases and user e-mail accounts. Then the company said it would stop censoring search results in compliance with China's government regulations. China prohibits Internet users from accessing offensive and politically controversial material.

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The Global Double-Dip Recession: Which Markets to Hold… And Which Ones May Fold

Last week's stock-market meltdown was a worldwide affair, and was touched off by trader fears of a global "double-dip" recession.

However, the truth is that the odds of a recessionary reprise are high in just a few countries - primarily those that have experienced excessive fiscal and monetary "stimulus," or that have real inflation problems.

The rest of the world is recovering just fine.

To find out which markets to hold - and which ones may fold - please read on...

Slowing Factory Output Suggests Global Economic Recovery May be Weakening

A slowdown in manufacturing growth spread across the globe in June, as factory output fell in China, Europe and the United States, suggesting the global economic recovery may be losing steam.

But the overall level of factory activity continued to expand, suggesting that manufacturers may be experiencing a return to more normal rates of growth rather than heading for a contraction.

In China, manufacturing growth slowed more than economists had forecast, and a gauge of factory output in the 16-member euro region fell for the second consecutive month, two surveys showed.

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Question of the Week: Readers Respond to Money Morning's Question on China's Currency

After months of intense political pressure, China last week announced that it would allow its currency to gradually appreciate against the U.S. dollar. China's currency - the yuan - has been pegged to the American greenback since 2008.

"This is going to lead to a transition from export-lead, investment-lead to more of a consumption-lead economy going forward," Jing Ulrich, chair of China equities and commodities at JPMorgan Chase & Co. (NYSE: JPM), told CNBC. "I think the ramifications are profound not just for the next few months but actually for the coming years."

Not surprisingly, U.S. exporters embraced the news as an opportunity to compete against Chinese companies and to reduce the U.S. trade deficit. Foreign nations, including the United States, have accused China of undervaluing its currency to give its exporters an advantage in global trade.

Chinese domestic consumption stands to benefit the most, as consumers will have more purchasing power on top of China's recent wave of multi-industry wage increases. Western companies that reach out to Mainland China can access a consumer base with more money and an increased desire to spend, which should give Western investors a chance to cash in on climbing profits.

However, not everyone will see immediate benefits from the new currency policy. In fact, the combination of big double-digit wage increases in China and an increase in the yuan will reanimate inflation.

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Commodities Are Key as China Continues to Call the Shots

China ended up being the big story this month, as investors looked past Europe to the Far East for clues about what shape the global recovery - if you can even call it that - is taking.

Markets around the globe tanked yesterday (Tuesday) after the Conference Board revised its leading economic index for China to show the smallest gain in five months in April. The index rose just 0.3% in April, which was a significant reduction from the 1.7% gain the Board reported on June 19.

The news of the error contributed to the biggest sell-off in Chinese stocks in more than a month, and sent U.S. indices into a dizzying downward spiral. The Dow Jones Industrial Average plunged 268.22 points, or 2.65%, to close at 9,870.30 and the Standard & Poor's 500 Index tumbled 33.33 points, or 3.10%, to close at 1,041.24.

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