China Beige Book reports wavering optimism

China Beige Book shows that manufacturers and retailers appear less assured about the future

PUBLISHED : Tuesday, 25 September, 2012, 12:00am
UPDATED : Tuesday, 25 September, 2012, 3:31am

The mainland's manufacturers and retailers are less optimistic about sales than they were three months ago, and more firms are cutting jobs, a survey shows.

The China Beige Book (CBB), modelled on the US Federal Reserve's Beige Book, found monetary easing has had limited effect.

After interest rates were cut in June and July, fewer companies borrowed money despite easier credit from banks, said CBB International, the New York-based research firm that conducted the survey. It was based on interviews with more than 2,000 executives and bankers.

The findings contrast with the CBB for the previous quarter, which said it found a rebound not reflected in official statistics and projected government data would reflect a pick-up by "mid to late summer".

Despite the overall slowdown in growth, some trends continued, including relatively faster growth in retailing and services, a recovery in the property market and greater strength in poorer and more peripheral regions than coastal industrial areas, said Craig Charney, research director for the China Beige Book, said.

Manufacturing was the area with the biggest declines in companies reporting higher revenue, down 20 percentage points to 43 per cent, and higher output, down 15 points to 47 per cent. Respondents expecting higher sales in six months dropped 18 points to 53 per cent, and those expecting declines doubled to 20 per cent, CBB said.

"The manufacturing sector is still facing difficulties in the short term. For instance, some steelmakers are now forced to cut output owing to price declines and high inventory," Zhu Haibin, JP Morgan's chief China economist, said. "This may hurt the labour market, with a possible rise in unemployment", though the rise may be moderate.

Retailing growth also slowed in the third quarter from the second, but by a smaller degree than manufacturing, the CBB report said. In all, 58 per cent of respondents reported higher sales, down 10 percentage points from the second quarter.

The number of companies reporting net hiring gains this quarter fell nine percentage points to 32 per cent, while those cutting employees rose to 20 per cent from 13 per cent, CBB said.

While half of bankers reported greater credit availability, up 10 percentage points, companies reporting borrowing dropped 9 points to 34 per cent.

Additional reporting by Victoria Ruan