The economic growth of China during the last few months made an upset to the expectations, and it may go worst. As according to the analyst, they are expecting 3rd quarter statistics to come in even weaker than the past. China Beige Book released a quarterly survey on Wednesday, and it showed that the economic growth slowed in the 3rd quarter whereas debt levels flew.
The report said that nationally, output, job growth, sales volumes, revenue and profits all slowed from a quarter ago, as did both export as well as domestic orders. China Beige Book does a survey of over 3,300 Chinese enterprises. The firm found critically that the debt levels remain upsurge, with bond issuance rising to its highest in the survey’s history. The ratio of shadow banking to overall borrowing was also at the 2nd highest on record. Shadow banking states unregulated lending actions that usually present higher risks as they exposed to less regulatory oversight.
The report reflects high debt levels
Managing director of China Beige Book International, Shehzad Qazi said that still borrowing is high. It might give some relief in the next quarter. Any worries of more labor market stress could result in Beijing pushing companies to staff up as credit is doled out. Any assessment is economic growth with very weak Q418 will look relatively better than it should. Official numbers of China last year that often doubted reflects 4th-quarter growth came in 6.4%, dragging the yearly rate to its slowest since 1990 at 6.6%.
China Beige book stated that borrowing by producers is so extensive that one viewpoint is: closely, every company surveyed borrowed this year. At the start of 2019, the growth pace held at 6.4% in the 1st quarter and dropped to 6.2% in the 2nd quarter. China is likely to release 3rd quarter net domestic product in mid-Oct.
Director general at the economic forecasting department of State Information Center, Yuxian Zhang also said that the 3rd quarter would spot a low point for China. He explained his opinion by saying that the policies of the government did not really come into force in the first half of 2019, and the impact of supportive moves like tax cuts will take some time. Moreover, Zhang expects the net local product to grow 6.1% in the 3rd quarter and 6.2% in the 4th quarter, bringing the annual gross to between 6.2% to 6.3%.
Liu Shangxi Optimistic about China’s goals
Instead of percentage points, it is not clear how successfully the government of China will continue in its efforts to stable supporting the economy with decreasing dependence on debt for growth. President of the Chinese Academy of Fiscal Science, Liu Shangxi said that China had achieved over half its goal of reducing taxes and fees by around $280.93 billion (about two trillion yuan) by the June end this year. He was talking formerly this month in Beijing at the China Development Forum.
Whereas, he pointed out that the initial implementation and announcement of tax cuts was unable to sustain the rate of economic growth from decreasing in the 2nd quarter, somewhat because of external factors. According to the Liu remarks Mandarin-language’s translation, the way of present macroeconomic policy and the finalization of the fee and tax cut policy should emphasize on rising confidence and more stabilizing business expectations.
Economic Slowdown of China
Trade conflicts with the United States, once largest trading partner of China, expressively added to economic uncertainty in the past year. However, many analysts have believed that the maximum slowdown of China’s economy happens because of the domestic reasons, like the two years ago attempt of the government to decrease reliance on debt for growth.
Premier Li Keqiang sustained the official growth target range of 6 percent to 6.5% earlier this month. Although, nothing that it would not be comfortable for the economy of China to grow faster than six percent in 2019. The officials are trying for over a year to boost up banks to give more loans to private enterprises because of the slowing pace of economic expansion. State-owned big banks of China usually prefer to lend to enterprises owned by the government, else than the private companies which genuinely contributes to the employment and majority of the national growth.
The official figures specify an amplified pace of lending to micro-sized and small corporations. On Tuesday, Yi Gang, the Governor of People’s Bank of China note while at a press conference that the balance of these type of enterprises stood at eleven trillion yuan at the August end which is an upsurge of 23% from one year before. Also, eight percentage points over the growth rate at the end of the earlier year.
Yi said that at the same time, they need to consider planning for longer-term, adding that structural adjustments required. Also, he said it was necessary to certify that the monetary policy’s effects being conveyed to the economy. Other policies he highlighted included promoting the economy’s high-quality development as well as lowering business financing costs.