What do the latest private survey results point to China’s economic growth going forward?

Bloomberg News reported on March 21, 2014 that based on the latest results from a private survey taken by a New York-based consulting company, China Beige Book (CBB) International, it is not quite surprising to find that the Chinese economy is showing signs on a slowdown, and might not achieve the targeted 7.5 percent economic growth for 2014 as outlined by Premier Li Keqiang in the recently concluded National People’s Congress (NPC).

The economic indicators which point to possible slowdown in the Chinese economy include industries and companies that were in the retail, and mining sectors which showed signs of slowdown in sales turnover, weak capital expenditures, and crumbling facilities, among others. The availability of credit financing has also gotten more scarce, with many reported not able to obtain loan approvals from banks and other financial institutions due to stricter loan regulations, tightened loan vetting procedures, background checks, among others.

The Chinese leaders, and officials from all government units including the People’s Bank of China (PBOC), the Chinese securities regulators, have been monitoring the tight monetary conditions very closely. They are currently holding back on introducing premature growth driven policies so as not to send out mixed policy messages, while also gradually starting to introduce market-driven reforms that will boost the overall confidence among the Chinese public in the government’s management of the Chinese economy. There were expectations from analysts and Chinese investors that the Chinese government might be forced to introduce reforms/policies that will invigorate the overall Chinese people’s faith in the government through active propaganda that seek to instil confidence among the Chinese people. However, with lives being impacted by many Chinese people due to the slowdown, and increased difficulties in finding a job, especially those rural migrants seeking to work and eventually settle down in urban areas, many Chinese people are starting to lose confidence, hoping that things will get better soon.

According to Bloomberg News, CBB International started the survey in 2012, modelled after the US Federal Reserve’s monthly beige book survey of businesses, and Americans living in the various US Fed districts throughout the country. The methodology of gathering, compiling, and analysing the data is quite similar to the US Fed’s Beige Book survey, except the data collection frequency is on a quarterly basis. The latest data from the survey was based on the July-to-September data which pointed out most of the economic indicators it has obtained were showing a contrast to what was actually being reported by the Chinese government. This shows how critical the situation has deteriorated in terms of economic growth, while the Chinese government chose not to be transparent and open about it. The proportion of retailer respondents reporting revenue growth fell 7.0 percentage points from the previous period to 54.0 percent, while sales gains were reported by 56.0 percent of the manufacturers, down 1.0 basis point (bps) from the previous quarter, but up 5.0 bps from a year earlier, suggesting that the manufacturing sector is showing some robustness.

The latest results compiled by CBB International are just one of the many data out there that is pointing to the overall slowdown of the Chinese economy. Manufacturing growth might have been driven by the competitive advantages, and being an export-led economy like China, resources are being deployed in this sector to spur growth. On the other hand, the results from the retail survey might not show growth given that most Chinese consumers are not reaching at a point where spending is considered the necessary driver for economic growth as seen in the United States. It is critical to analyse data and give some thoughts on the long-run implications of a prolonged slowdown of the Chinese economy.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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