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 The quarterly survey of over 2,100 businesses by China Beige Book
International (CBB) showed continued robust growth in the service
sector but persistent weakness in manufacturing.
Still, while revenue growth slowed quarter-on-quarter, and only 38
percent of firms surveyed planned to hire more staff in the fourth
quarter - down 4 percent on the year - the authors emphasized the
relative resilience of the corporate sector heading into year-end.
"Q3-15 was hardly a game changer...the broader collapse assumed by
disciples of the PMI has strikingly little basis," report authors
Leland Miller and Craig Charney wrote, noting that firms also
reported falling real interest rates.
"In fact, there is very little to distinguish Q3’s revenue
performance from many previous quarters, calling into question
August’s global market sell-off that most attributed to China’s
sudden 'fragility'," they said.
The relatively sanguine views of the Beige Book report contrasts
with the recent string of weak economic indicators, which have
raised fears of a deepening economic slowdown in China and in part
prompted the U.S. Federal Reserve last week to hold off from
delivering its first rate hike in almost a decade.
A stock market crash has further dimmed investor sentiment, which
remains fragile despite a flurry of stimulus measures including
several interest rate cuts as Beijing stepped up efforts to support
an economy growing at its slowest pace in decades.
HOPEFUL SIGNS
But the report pointed to some hopeful signs, with hiring steady in
the third quarter and the economy continuing to draw support from a
healthy services sector where many of China's more productive
private enterprises lie.
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Revenue rose at 59 percent of service sector firms surveyed in the
third quarter, up six percent on the quarter.
Across all firms, profit margins were up at 47 percent of the
companies surveyed, 2 percent higher than the second quarter.
Capital expenditure was another bright spot, rising for the second
quarter in a row, with 48 percent of firms surveyed reporting
increases in capex, up 3 percent on the second quarter.
Loan demand, however, was extremely weak, continuing a pattern
evident for much of the year. Of bankers surveyed, only 36 percent
reported a rise in applications, down 11 percent from the second
quarter.
Moreover, the modest rebound in the real estate and construction
sector evident earlier in 2015 also appeared to be losing steam.
(Reporting by Nathaniel Taplin; Editing by Pete Sweeney and Shri
Navaratnam)
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