China’s economic slowdown has deepened this quarter, as capital spending has showed weakness and fewer companies have applied for credit, a private survey showed.
Half of businesses reported higher investment, the smallest proportion and the sharpest drop since the survey began 10 quarters ago, according to the China Beige Book, a report published quarterly by New York-based China Beige Book International.
The slowdown hurt hiring and wages and interest rates offered by shadow lenders fell below levels offered by banks, it said.
“Since investment has been the engine of the economy for the past seven years, this weakness has sweeping effects on sectors, regions and gauges of firm performance,” Leland Miller, president of China Beige Book International, said in a statement with Craig Charney, director of research and polling.
“Overinvestment has been an addiction and withdrawal symptoms will not be pretty,” he added
China’s economy rose 7.7 percent last year and 2012, down from an average 10.6 percent a year in the previous decade.
Fewer companies than in the previous survey in March said they expect to increase investment in the next quarter and the proportion that anticipate cutting spending increased, according to the report.
For the first time since the results of the China Beige Book survey began to be released in 2012, no sector showed an improvement compared with the previous quarter, the report said.
Transportation, mining and retail slowed and services weakened more sharply.
The survey showed “dramatic differences” between parts of the real-estate industry, with commercial and residential realty “pummeled while construction held up fairly well.”
Fewer companies in commercial and residential realty reported revenue gains and prices were flat or falling.
However, commercial construction realty saw steady price and volume growth and starts “perked up,” according to the report.
The number of businesses applying for bank loans dropped and fewer bankers reported increased lending to businesses in the quarter, confirming companies’ reports of a credit squeeze.
Services took the “biggest hit” in the quarter’s slowdown, the survey showed.
The proportion of respondents reporting revenue growth dropped to only 44 percent, down 11 percent from the previous quarter and 10 percent from a year ago.
The China Beige Book report was compiled from 2,043 10-minute interviews conducted from May 12 to June 3 through an online survey plus 32 face-to-face 20-minute interviews conducted from June 9 to Thursday last week.