China Beige Book Shows Pickup Unseen in Official Data
China’s official statistics may be lagging behind independent data that show a pickup in the world’s second-biggest economy last quarter, according to a new private survey modeled on the U.S. Federal Reserve’s Beige Book.
The China Beige Book, through interviews of about 2,000 company executives and bankers, found retail sales and manufacturing strengthened while property sales increased and shortages of unskilled labor failed to abate. CBB International LLC, the New York-based researcher that conducted the survey, provided a summary to Bloomberg News via e-mail yesterday.
The report said four of every five retailers see higher sales in six months, a bigger proportion than in the first quarter, contrasting with government data showing the weakest non-holiday sales growth since 2006 in May. Bankers foresee growing availability of loans and 46 percent of companies intend to borrow, “suggesting a fairly stable rise in credit demand.”
“These findings diverge considerably from the current ‘gloom and doom’ narratives,” CBB President Leland R. Miller and Craig Charney, director of research and polling, said in a statement to Bloomberg. The official statistics probably lag CBB’s data by one to three months and may reflect a pickup by “mid- to late summer,” they said.
The survey suggests China’s measures to reverse the deepest slowdown since 2008 may be boosting growth even as Europe’s sovereign debt crisis crimps exports. Authorities lowered interest rates last month for the first time in more than three years and have cut reserve requirements for banks three times since November while speeding approvals for investment projects.
At BNP Paribas SA in Beijing, economistKen Peng said that while it’s helpful to have competing views of the Chinese economy, he can’t judge the value of the research because he hasn’t read it and doesn’t know its methodology.
“The economy as a whole is now strengthening modestly” and credit is “fairly loose,” Miller said in an e-mailed response to questions. “Quarter-on-quarter growth was particularly evident by June in consumer spending and real estate, while agriculture and mining also showed improvement.”
The MSCI Asia Pacific Index of stocks fell 0.4 percent as of 1:18 p.m. in Tokyo. Separately today, China’s proposed rules for banks will continue limiting loans to 75 percent of deposits and include new requirements that may constrain credit growth, a senior official at the banking regulator said.
CBB said its findings are based on interviews with 1,783 company managers, face-to-face interviews with 138 senior corporate executives and telephone interviews with 160 bank loan officers and branch managers. The survey was conducted from May 14 to June 8.
The survey uses methodology adapted from the Fed’s Beige Book survey, according to CBB. The central bank is not involved in the China survey, CBB said. The U.S. Beige Book is published eight times a year, or two weeks before each meeting of Fed policy makers, giving anecdotal data to inform interest-rate decisions.
CBB provided Bloomberg with a full copy of the inaugural first-quarter report running 58 pages. It contains chapters on each region with anecdotes from companies it didn’t identify.
Examples included a toilet maker countering labor shortages by moving to northern Guangdong province and hiring local workers at higher wages instead of migrants from inland provinces. The president of a food-store chain said banks were very strict in examining and verifying loans, according to the report.
The China Beige Book’s second quarterly survey showed property agents reporting higher second-quarter revenue doubled to almost 60 percent, manufacturers recording rising sales increased 3 percentage points to 63 percent and retailers with increased sales climbed 5 percentage points to 68 percent.
Retailers expect spending to strengthen further and 71 percent of manufacturers foresee higher revenue in six months, the survey said, indicating a reduced need for further stimulus measures.
The data contrast with another private survey watched by investors, the manufacturing purchasing managers’ index released monthly by HSBC Holdings Plc and Markit Economics. That gauge fell in June to the lowest level since November, showing a contraction for an eighth straight month. The survey covers executives at more than 400 companies.
Some parts of the economy may have slowed further in June, based on preliminary results of analyst surveys by Bloomberg News. Growth in exports may have fallen to 10.5 percent in June from a year earlier compared with 15.3 percent in May, while expansion in retail sales weakened by 0.3 percentage point to 13.5 percent, according to median estimates.
The key drivers of an “upswing” in the real estate market were increasing sales volumes that were reported by 54 percent of residential property agents and 57 percent of commercial property agents, the China Beige Book said.
Not all the data in the China Beige Book showed a pickup. Manufacturers that principally export are “hurting,” with 28 percent reporting sales declines, double that for firms that also rely on domestic markets, the report said. More than a fifth of residential property developers and 18 percent of commercial developers had declining revenue in the quarter.
Shipping companies’ expectations also deteriorated with the proportion expecting higher revenue in six months falling 15 percentage points to 52 percent and those anticipating drops tripling to 21 percent, the survey found.
Elsewhere in the Asia-Pacific region today, Malaysia’s central bank is forecast to leave its benchmark interest rate unchanged at 3 percent, where it’s been for more than a year. Taiwan’s consumer prices rose 1.77 percent in June from a year earlier, the fourth straight acceleration.
The European Central Bank meets in Frankfurt, where analysts anticipate officials will lower the benchmark interest rate to a record low of 0.75 percent. The U.S. may say applications for jobless benefits declined to a four-week low of 385,000 in the period ended June 30.
The China Beige Book divides China’s 31 provinces, municipalities and autonomous regions into eight geographic areas and covers industries including manufacturing, retail, service, transportation, property, farming and mining.
The project’s backers say they are first to gather this much independent data across China’s regions and industries to provide a regular snapshot of the economy akin to the Fed’s in the U.S. The company is charging a “premium” price for the quarterly reports that Miller declined to specify.
“The Chinese economy has become too complex to simply accept the old standby data sources,” Miller, 35, said in an interview.
CBB was formed by people from New York-based Charney Research and consultant Avascent International of Washington. Craig Charney, president of Charney Research, has conducted polls in more than 35 countries including India and Indonesia and worked for political figures such as U.S. President Bill Clinton, according to a biography from CBB.
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