China retail sales lead business activity weakness, survey finds
Despite sagging business activity, signs of stability in credit availability and a rise in new factory orders indicate further slowdown is unlikely
Slowing retail sales stand out as the primary drag on the mainland's economic growth so far this year, while activity in almost every other business sector sagged, the latest quarterly China Beige Book survey found.
But signs of stability in the availability of credit and growth in new domestic and export orders for the massive factory sector were indications that a further deterioration in the economy might be averted.
"The pace of Chinese economic expansion has plainly slowed," Leland Miller, president of survey publisher CBB International, said in a statement accompanying the results. "There is certainly gloom, but also perhaps a bit of light."
The fall-off in retail extended far beyond luxury goods, hurt by the government's nationwide corruption crackdown, and only firms in the transport sector reported better revenues in the first quarter of this year than in the fourth quarter of last year.
Gains in retail revenues were reported by just 54 per cent of survey respondents, down from 61 per cent in the fourth quarter and 73 per cent a year ago. Retail sales over the Lunar New Year period were the weakest in at least three years.
Revenues, sales, profits and wages were all weaker than a year ago for firms surveyed in one of the most comprehensive nationwide polls of business conditions in the world's second-biggest economy.
Tightening credit that had been a problem in previous quarters stabilised, but access to finance for firms was only slightly better than the nine-quarter low in the fourth quarter.
Loans to new customers edged up, with 17 per cent of bankers surveyed saying more than 30 per cent of loans went to new customers, up three percentage points from the fourth quarter.
Meanwhile, the spread between interest rates paid on loans made by banks and those made by non-bank lenders pushed out to its widest in a year, indicating that capital is getting more expensive for firms that cannot borrow from mainstream lenders.
But a bounce back for the factory sector was flagged by data showing solid growth in new domestic and foreign orders everywhere except the northeast of the country. Firms in the main manufacturing engine, Guangdong province, reported stronger orders.
"The results do not indicate a boom later in 2014, but they do suggest that linear forecasts of continued deterioration may be overly simplistic," Miller said.
A number of major international investment banks have cut their China growth forecasts for this year in recent weeks as official data has indicated lingering export weakness, a softening of industrial output and an easing of credit growth.
The China Beige Book survey, modelled on the United States Federal Reserve survey of the same name, polled executives from manufacturing, retail, services, transport, property and construction, and farming and mining firms. Respondents run businesses of every size, from micro firms with a handful of staff to large companies employing more than 500 workers.
The survey also canvassed opinions from bank loan officers and bank branch managers.