China’s economy slowed this quarter as growth in manufacturing and transportation weakened in contrast with official signs of an expansion pickup, a private survey showed.
Increases in business investment and real-estate revenue also slowed, while service industries picked up and the employment market tightened, the survey from New York-based China Beige Book International said on Tuesday. The report is based on responses from 2,000 people from Aug. 12 to Sept. 4, as well as 32 in-depth interviews conducted this month.
The quarterly report, which began last year and is modeled on the US Federal Reserve’s Beige Book business survey, diverges from government figures showing faster factory-output gains in July and last month that have spurred analysts from Citigroup Inc to Deutsche Bank AG to raise expansion estimates. Nomura Holdings Inc is among banks skeptical that any rebound will be sustained next year.
The results “show the conventional wisdom of a renewed, strong economic expansion in China to be seriously flawed,” China Beige Book president Leland Miller and Craig Charney, research and polling director, said in a statement.
The data “reveal weakening gains in profits, revenues, wages, employment and prices, all showing slipping growth on-quarter — no disaster, but certainly not the powerful expansion suggested by the consensus narrative,” they said.
The report, like the Fed’s version, does not give estimates of GDP growth or other indicators beyond the survey results. The economy expanded 7.5 percent in the April-June period from a year earlier, slowing for a second quarter, according to China’s National Bureau of Statistics. The government has since introduced measures, including faster railway spending and tax cuts, to aid expansion.
Jim O’Neill, former chief economist at Goldman Sachs Group Inc, expects that China’s economy would double in five years to US$16 trillion, about the same size as the US economy now.
China’s leadership is “deliberately” slowing the economy and is capable of putting the housing market and lending under control, O’Neill, a Bloomberg View columnist, said on a panel moderated by Tom Keene at the Bloomberg Markets 50 Summit in New York.
“They are not shy or scared about meeting the scale of some of the challenges,” he said.
The first China Beige Book, from the second quarter of last year, said the economy was picking up, a few months ahead of official data indicating a rebound. This year’s second-quarter report showed expansion slowing across the country and a decline in companies taking out loans.
The latest survey said 47 percent of manufacturers reported revenue gains, down 6 percentage points from the second-quarter survey. Growth in export orders was “stable” for the US and Europe and “off a bit” in Asia and developing nations outside of Asia.
In transportation, including shippers, 51 percent of respondents said revenue rose, down 18 percentage points from the second-quarter survey. Fifty-three percent of a broader sample of businesses said investment rose, down 4 points. Service revenue rose for 57 percent of respondents, up 3 points.
The survey said bank-loan gains ebbed and borrowing costs declined, while companies used non-bank channels more often. Forty-six percent of bankers said loans rose, down 14 percentage points from the prior survey, and there was a 20-point drop in the share expecting credit availability to ease in six months. The mean interest rate on all new loans fell 47 basis points to 6.63 percent,the survey showed.
So-called shadow lenders’ share of financing rose to 29 percent of loans in the third quarter, up 5 points, the survey showed.
Not all the China data showing a rebound have come from government sources. A report released by HSBC Holdings PLC and Markit Economics on Monday showed manufacturing strengthened more than estimated this month, mirroring an increase last month in a similar government-produced index.
Singaporean Finance Minister Tharman Shanmugaratnam said in a speech yesterday that while he does not see a “hard landing” for China, a growth rate of less than 6.5 percent would have “major implications for the rest of the world, and especially for Asia.”
Paul Gruenwald, Standard & Poor’s chief Asia-Pacific economist, said in a report yesterday that China’s growth may range from 7 percent to 7.5 percent during this year and beyond, a level that will become the “new normal.”