China’s soft economic data belie the “broad-based recovery” that has taken place during the second quarter in world’s number two economy, the latest China Beige Book report has claimed.
The quarterly private-sector survey found that China’s pickup in the second quarter was largely driven by a resurgence in the retail and real estate sectors, CNBC reported.
“The second quarter of 2015 was plainly better than the first,” the CBB said. “Overall, firms continue to do better than official data—and its legions of sell-side users—might suggest. Cash flow remains stable, volumes are increasing, and margins saw a minor uptick. Capex and borrowing both stabilized this quarter, while the jobs market continues to show resiliency,” the report added.
The report found retailers’ revenue grew at a faster pace in the second quarter than manufacturers’ for the first time in 18 months, as higher sales volumes drove an improvement in earnings. But the quarter’s improvement was led by retailers selling mainly to businesses and government rather than those selling mainly to consumers, suggesting some fragility in consumer demand.
Meanwhile, the property sector–seen as a major risk for the Chinese economy–also showed signs of a rebound, with commercial and residential property firms enjoying a sharp pickup in volumes and revenues. As demand recovers, deflationary risks may have peaked, CBB said.
Recovery in Prices
“After several quarters where deflationary risks dominated the headlines, the second quarter’s most intriguing development may be the recovery in prices,” it said. “The rate of climb is still slower than a year ago, but this at least represents a break from the seemingly unstoppable tide of price deterioration.”
The survey, launched in 2011, is based on interviews with over 2,300 respondents, made up of business executives across sectors and regions in the mainland. The sample included C-suite executives from manufacturing, retail, services, transportation, real estate and construction, farming and mining.
While official data released in recent weeks have offered some indication the worst of the mainland’s slowdown may be over–for example, the National Bureau of Statistics unveiled figures last Thursday showing month-on-month declines in new home prices reversed in May for the first time in more than a year–pockets of weakness in the economy remain.
The export sector, for one, continues to struggle amid weak external demand. Exports fell by 2.5% on year in May after tumbling 6.4% in the previous month.
Fixed asset investment–a key driver of the economy–also remains soft, rising 11.4% in the first five months of this year from the year-earlier period, down from 12% registered in the January-April period this year.
Discussing whether the meteoric rise in Chinese equity prices has helped fueled some of recovery, CBB said there wasn’t clear evidence of this yet.
