Our optimism for China was ill placed last month as the reprieve in weakness was short-lived. Air cargo traffic growth is clearly now in a decelerating trend. Port traffic growth has also completely rolled over and is now in a downtrend. Likewise, the manufacturing PMI has broken down and now solidly in contraction territory. China's economy looks to be stalling which naturally has serious ramification for global trade. Recall China is the world's largest trading nation with annual two-way trade with the world in excess of US$4 trillion or equivalent to about 6% of global GDP. Given the tepid recovery in most countries, weak demand from a major trading partner would be the sort of negative shock that could arrest a recovery. So far the deceleration in the Chinese economy has been largely orderly so we remain optimistic that China will manage a soft landing for its economy. Follow the link to see the rest of Australian Ethical's monthly macroeconomic assessment update. (VIEW LINK)