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.”
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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