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China’s manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low. Its dragging on employment amid a deepening slowdown in global demand and aggravated by a stall in domestic consumption. World markets fear of a China “Hardlanding” that may stall the world economy. The country can’t keep building airports, railway lines and apartment buildings at its recent run rate, forever. Even the Communist Party has openly acknowledged that the economy is imbalanced, with too high a proportion of capital investment versus consumption. Party leaders may even become pro-active about changing that in the new five-year plan, but either way, eventually things will change…So, about this supercycle. Credit Suisse’s analysts published a view of their internal debates over the China outlook, after Dong Tao, their chief regional economist for Asia ex-Japan, came out with a rather bearish take on the China outlook, stating that the commodities supercycle is over.

A preliminary reading of HSBC’s manufacturing Purchasing Managers’ Index (PMI) for March, released Thursday, printed at 48.1 on a 100-point scale, down from a final reading of 49.6 in February. The flash PMI is based on 85% to 90% of the total responses during a given month, and is an early indicator of business conditions facing Chinese manufacturers. Weakening domestic demand continued to weigh on growth, as indicated by a slowdown in new orders, which came in at a four-month low. Employment recorded a new low since March 2009, suggesting slowing manufacturing production was hindering enterprises’ hiring desire.”

The deterioration in orders matched a surprise slump in industrial production growth, adding to the darkening outlook that will play a role in the decision-making of factory managers. “External demand remained in contraction territory, but the decline was at a slower pace, implying that there are no improvements in the demand outlook.

Slowing activity could mean a further relaxation of monetary policy to help underpin growth in the world’s second biggest economy, but lingering inflation  risks uncovered by the survey highlight the dilemma facing China’s policy makers who are determined to keep a lid on prices.

CHINA is routinely accused of exporting too much. Its foreign sales far exceed its foreign purchases, often by a wide margin. This chronic surplus angers many. This week President Barack Obama signed a bill that restores his administration’s power to impose tariffs on countries like China and Vietnam, when their goods are reckoned to be subsidised or dumped on American markets. The bill passed swiftly through both chambers of Congress. When it comes to rebuffing China’s exports, America’s fractious legislature is as harmonious as the Chinese one.

But this month brought two intriguing breaks to the routine. On March 13th three of China’s biggest trading partners—Japan, the European Union and America—complained that China was exporting too little, not too much. They brought a case at the World Trade Organisation alleging that China was unfairly restricting its exports of tungsten, molybdenum and 17 “rare earths”, obscure elements such as terbium and europium, used in the manufacture of many high-tech goods including fluorescent lights. China’s reaction was incandescent; it dismissed the case as “groundless”.

The other novelty arrived a few days earlier when China’s customs bureau reported something rarer than europium: a Chinese trade deficit. At $31.5 billion in February, the imbalance was bigger than any deficit on record—it was bigger even than many of China’s monthly surpluses.

China’s trade balance often dips around Chinese New Year, as export factories close for the festival. The holiday also arrived earlier this year than last, distorting the data. But even if the figures for January and February are added together, China ran a deficit of over $4 billion. Exports and imports typically rebound in sync as China gets back to work. This year, imports rebounded alone (see chart 1).

The deficit has fuelled one fear and one hope. The fear is that China’s economy will slow sharply, hobbled by declining exports to crisis-racked Europe and a rising bill for commodities like oil. The hope is that China is rebalancing, moving away from an economic model reliant on foreign demand. Neither the hope nor the fear is wholly justified by this month’s figures.

It is true that China’s weak exports are contributing to a slowdown in the broader economy. China’s industrial production grew by 11.4% in January and February, compared with the same two months in 2010, much slower than its normal pace of about 15%. But the prospects for global growth are brightening, suggesting that China’s exports have bottomed out. And the slowdown in China’s economy has been matched by a helpful fall in inflation. That gives China’s government some scope to stimulate demand.