China’s economic growth may be looking at another rough quarter

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  • China Beige Book says Wednesday that results of its third quarter survey are the weakest so far this year.
  • Critically, the firm finds that debt levels remain on the rise, with bond issuance climbing to its highest in the history of the survey and the ratio of so-called shadow banking to overall borrowing the second-highest on record.
  • Yuxian Zhang, director general and research fellow at the State Information Center’s economic forecasting department, also expects the third quarter will mark a low point for China this year.

BEIJING — China’s economic numbers in the last few months have disappointed expectations but the worst is not over — analysts are expecting third quarter data to come in even weaker than before.

A quarterly survey by China Beige Book released Wednesday showed that growth slowed in the third quarter while debt levels soared.

“Nationally, revenue, profits, output, sales volumes, and job growth all slowed from a quarter ago, as did both domestic and export orders,” the report said, citing China Beige Book’s survey of more than 3,300 Chinese businesses.

Critically, the firm found that debt levels remain on the rise, with bond issuance climbing to its highest in the history of the survey.

The ratio of the so-called “shadow banking” to overall borrowing was also at the second-highest on record. Shadow banking refers to unregulated lending activities that are often present higher risks as they are subjected to less regulatory oversight.

High debt levels

“Borrowing is still high. This could offer some relief next quarter. Any fears of further labor market stress could result in Beijing pushing firms to staff up as credit is doled out,” Shehzad Qazi, managing director of China Beige Book International said in an email. “That said, any comparison (in economic growth) with very weak Q418 will look comparatively better than it should.”

Last year, China’s official numbers — which are frequently doubted — showed fourth-quarter growth came in at 6.4%, dragging the annual rate to its slowest since 1990 at 6.6%.


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