A recent private survey conducted by China Beige Book, which had over 4,600 respondents, indicates that China’s economy is showing signs of recovery in the second quarter of this year.
The survey results suggest that the rate cuts implemented by the People’s Bank of China in August may not have had the desired impact on spurring growth. This raises doubts about the effectiveness of the latest round of rate cuts in mid-June.
Leland Miller, the chief executive of China Beige Book, commented on the situation, stating, “For months, analysts have been advocating for big-bang monetary easing in Beijing. However, the efforts made by the People’s Bank of China have not produced the desired results.”
The report also highlights that the current monetary stimulus measures in China are not effective in boosting growth as expected.
Furthermore, the weaker-than-expected economic growth in April and May has led to calls for more decisive monetary actions to support the economy. Major Wall Street banks have already lowered their growth projections for China.
“China’s 2023 rebound isn’t sharp, but it’s also not finished yet.”
Shehzad Qazi
Managing director, China Beige Book
According to China Beige Book’s survey, national borrowing in China has reached its lowest level since 2010. Additionally, the demand for loans is weaker compared to last year.
While credit conditions have improved in the property sector, sales and prices in the residential real estate market have declined.
Bright spots in China recovery
Despite these challenges, China Beige Book expects the second-quarter growth to be stronger than the first. Manufacturing, retail, and services sectors have reported acceleration in revenue. Chinese Premier Li Qiang has also expressed optimism about the country’s economic recovery.
The survey involved 4,604 respondents in China and provides an early insight into the state of the economy before the official government data is released in mid-July.
Shehzad Qazi, the managing director of China Beige Book, stated, “Markets have shifted their focus from a consumption-powered recovery to a stimulus-driven one. However, consumer spending is still active.”
“China’s economic recovery is primarily driven by its first-tier cities due to the higher affluence and spending power of the population,” according to China Beige Book.
However, there are challenges such as weak prices as China strives to maintain its global market share in the midst of a global economic downturn.
“If you believe the economy is terrible when it isn’t, you may anticipate major stimulus coming when it won’t.”
Derek Scissors
Chief economist, China Beige Book
The weakening Chinese yuan, which recently hit an eight-month low against the U.S. dollar, has compounded the economic challenges.
China Beige Book warns that market expectations for an economic recovery may have been overly optimistic. Derek Scissors, the chief economist of China Beige Book, stated, “China’s second-quarter story is one in which one mistake breeds another. If you believe the economy is terrible when it isn’t, you may anticipate major stimulus coming when it won’t.”
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