The China Beige Book sees creeping caution among consumers and businesses


Passengers at work wear protective masks as they get off the train at a subway station during the rush hour on Monday, April 13, 2020 in Beijing, China.

Lintao Zhang | Getty Images news Getty Images

BEIJING – Chinese businesses and consumers are not as optimistic about the economy as overall data might suggest, an independent study by China’s beige book showed on Tuesday.

In its latest quarterly survey, the U.S. firm found that China’s corporate borrowing rate fell to its lowest level in the study’s history, and that expectations for credit demand fell in the next six months – despite low interest rates.

Of particular concern is that the number of traders taking loans has fallen to a record low, the report said.

“After the pandemic, it is extremely difficult to believe that this is the result of sufficient capital,” the authors wrote. “It is much more likely that traders are divided between seeing little opportunity for expansion and thinking that their loan applications will not fly.”

The trend is worrying for the economy that the government is trying to drive by individual consumption.

“If credit remains tight and retail does not break out of a coma, the economy will find it difficult to match this level of growth in the next quarter,” the report said.

The study found that business activity in the second quarter was similar to that of the first, with unchanged income and profits and increased employment.

China’s GDP grew 18.3% in the first quarter from a year ago – or an increase of 10.3% from the same quarter in 2019. GDP in the second quarter is expected to be announced on July 15.

However, retail sales growth has fallen below analysts ’expectations in the last two months.

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“Weakness in retail stems from consumers becoming more defensive,” Shehzad H. Qazi, CEO of China Beige Book, said in an email. He noted that Chinese consumers spend on food, but not so much on luxury, clothing, furniture and appliances.

“We believe these are driven by two main factors: first, people continue to fear future Covid outbreaks; second, Chinese consumers are simply not convinced that a sustainable, broad-based economic recovery has yet to be achieved,” Qazi said.

Although China controlled the domestic outbreak of Covid-19 until the second quarter of last year, the pockets of the epidemic that year led to small blockades and new restrictions on social activity in various pockets of the country. The latest jump in cases began in late May export hub of Guangdong Province.


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