This survey seems to have tarnished China’s official statistics, indicating that the prospects for economic recovery are more easing. According to China’s official statistics released this week, China’s factory and service industry activities continued to grow in December, driven by pent-up demand and strong export demand, which helped Beijing’s recovery from the coronavirus shock.
The economy is expected to grow by about 2% this year, reflecting that economic recovery will defeat other major economies that are still struggling to control infection.
However, a business survey released two days before the introduction of the new official statistics seems to have tarnished the official statistics, indicating that the economic recovery is more moderate. The report pointed out that weak consumer spending is not conducive to Beijing’s efforts to encourage more private sector corporate loans.
More importantly, data from the independent economic data provider China Beige Book International emphasizes that consumer-oriented industries continue to lag behind. For example, telecommunications, shipping, and financial service industries have promoted the growth of the service industry. However, consumer-oriented businesses (such as restaurants and tourism) continue to lag behind.
People have yet to get involved in chain restaurants. Revenue from the travel and hospitality industry also showed weakness.
In the fourth quarter, sales growth of luxury goods, food, and clothing also fell sharply, and profit margins and recruitment numbers were also squeezed. According to interviews with 3,300 business leaders between November and December, the “China Beige Book” survey shows that China has not fully recovered from the impact of the coronavirus pandemic.
About two-thirds of the executives surveyed by the consulting firm said that they expect that sales, profitability, and recruitment will not return to 2019 levels until at least three months in 2021.
Economists have emphasized that most of the spending comes from the public sector, most of which is based on large-scale stimulus plans, rather than private companies.
Keyu Jin, professor of economics at the London School of Economics and Political Science, pointed out three reasons why people are worried about the Chinese economy.
First of all, she emphasized in the “Japan Times” that China’s exports exceeded expectations because its industry reopened when the world was shut down and became a global supplier of last resort. Professor Keyu believes that this situation will be reversed when the global production base reopens.
Second, he said that after years of an economic shift from exports and investment to consumption, the economic recovery has triggered a broader structural deterioration. Third, she warned of the impending financial risks in the real economy and predicted the increase in bad debt risks, which would pose a major threat to financial institutions.
“China Beige Book” has pointed out that by the last quarter of 2020, the loan rejection rate for retail business will increase from 14% in the previous quarter to 38%.
The rejection rate of small and medium-sized enterprises rose to 24% in the fourth quarter, twice the rejection rate of large companies in the same period.
Chinese President Xi Jinping seems to be aware of some of the upcoming challenges. The Central Economic Work Conference did not warn of “downward pressure on the economy” at its mid-December meeting.
However, the statement issued by the three-day summit did assert at the end of the key annual policy meeting that there are many uncertain factors, “the foundation of our country’s economic recovery is not yet solid,” and the recovery will be “unstable and uneven.”