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China Beige Book Says Economy Slowing

Bloomberg | March 20, 2014

China’s economy slowed this quarter, with industries including retail and mining showing weaker revenue growth while loans through non-traditional channels became more expensive, according to a private survey.

Even with the moderation, the labor market and wage growth were little changed from the previous quarter, according to the China Beige Book survey, published by New York-based CBB International.

The report adds to signs that Premier Li Keqiang may face difficulties reaching an expansion target of 7.5 percent this year without stimulus. The State Council, or cabinet, said this week it will speed up construction projects and other measures to support the economy after data showed moderating growth in industrial production and investment.

“The pace of Chinese economic expansion has plainly slowed,” Leland Miller, president of survey publisher CBB International, said in a statement with Craig Charney, director of research and polling. “A weaker retail performance is the principal driver of the aggregate trend.”

The Shanghai Composite Index (SHCOMP) rose 0.8 percent today as of the 11:30 a.m. local-time break. Chinese stocks listed in Hong Kong also rebounded after yesterday entering a bear market as the yuan weakened and Goldman Sachs Group Inc. cut its forecast for the nation’s economic growth.

Slower Expansion

CBB International began releasing the China Beige Book reports in 2012. The previous survey showed the world’s second-largest economy strengthening in the fourth quarter, while official data showed a slowdown from the third quarter’s pace of expansion. The China Beige Book report for July-to-September indicated a slowdown, compared with government data showing a pickup.

The world’s second-largest economy will expand 7.4 percent in the January-March period from a year earlier, based on the median estimate in a Bloomberg News survey conducted over the past week. That would be the weakest pace since the third quarter of 2012. A majority of economists forecast a cut in banks’ reserve-requirement ratio by the end of the year.

The proportion of retailer respondents reporting revenue growth fell 7 percentage points from the previous period to 54 percent, according to the CBB survey. There was a 7-point drop, to 39 percent, in the proportion of mineral producers reporting increased sales. Fewer companies in services and real estate said revenue rose.

Manufacturing Bellwether

Sales gains were reported by 56 percent of manufacturers, down 1 percentage point from the previous quarter and up 5 points from a year earlier, according to the survey. Fewer manufacturers reported revenue declines, it said.

“Stable first-quarter growth in manufacturing confirms our long-standing thesis that it is no longer the economy’s bellwether,” Miller and Charney wrote.

The average interest rate on bank loans fell 16 basis points from the previous period to 6.33 percent, while the rate on non-bank loans rose 26 basis points to 8.39 percent, according to the report. That’s the widest spread in a year, China Beige Book said.

Companies reported labor availability, hiring growth and wage gains that were little changed from the previous quarter, according to the survey.

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