Pls see attached the full PDF research report, below is a highlight:
 
◆       Growth of industrial value added slowed markedly in October. China’s above-scale industrial value added (VAI) grew 8.2% YoY in October (Chart 1), far below the market forecast of 11.1% and settling to the lowest since 2001 (excluding the effect of Chinese New Year), showing that the Chinese economy is worsening as both exports and real estate, the two growth engines, are slowing down.
◆       By product, October output growth slowed significantly for all major industrial products except crude oil which grew steadily (Chart 2). Steel recorded the worst output growth: -16.8% for pig iron, -17.0% for crude iron and -12.4% for steel products (-6.1%, -9.1% and -5.5% in September), suggesting that some plants cut production due to severe overcapacity. Auto output slid 0.7%. Electricity production shrank 4% YoY in October, the first decline since May 1998 (Chart 3; excluding the effect of Chinese New Year), attributable to the hard landing of power-intensive heavy industries (Table 3; steel, chemical and non-ferrous metal industries are the three biggest power consumers).
◆       By sector, October value added growth slowed substantially for all industries, with the sharpest slowdown seen in chemical, steel and power industries (Table 4). This is consistent with our view that China’s heavy-industry-focused development pattern causes severe overcapacity, and basic material production and power generation will make a hard landing once the economy slows down (please see our report 2009 Is Not the Bottom dated October 9).
◆       Fiscal revenue also shed 0.3% in October amid the economic downturn, the first time since 1996 (excluding the yearend effect). Growth of fiscal revenue turned negative in October from the 33.3% level in 1H08 and does not look promising in 2009. Thus, funding any big government investment becomes a question; massive bond issuance is possible.
◆       Looking forward, we believe industrial production will remain slack in 4Q and corporate profits and power consumption may make a hard landing, thanks to slackened