China’s economy held steady in the third quarter, according to a new report that contradicts widespread market perceptions of a dramatic slowdown.
“The China Beige Book,” a quarterly report that uses surveys of Chinese executives and other private data to measure the country’s macroeconomic health, said that both capital expenditures and jobs actually rose in the quarter, while companies’ revenue growth dipped only slightly.
“Current market perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy,” said the report by Leland R. Miller and Craig Charney of CBB International, the Washington firm that publishes the data. “What’s most remarkable is how truly unremarkable the quarter was.”
The “Beige Book” relies on surveys of executives from about 2,100 firms from a variety of industries, along with more in-depth interviews of more than two dozen executives.
The data showed that 48 percent of executives reported spending more on capital projects in the quarter, up five percentage points from the second quarter and down only slightly from the 2014 third quarter. The report said that 36 percent said their companies added employees, up slightly from the previous quarter and a year earlier.
Growing concerns about the health of the world’s second-biggest economy have provided a tense backdrop to China President Xi Jinping’s first state visit to the United States this week.
Global stock markets have been roiled since the summer, when a selloff on China’s main stock markets and the Chinese government’s awkward efforts to control it triggered concerns about the state of the country’s economy. Those concerns were reinforced when the government surprised markets in August with a move to devalue its currency.
Investor concerns have been amplified by a lack of trust in China’s official economic data, which, experts say, are subject to political manipulation and produced by a flawed data-gathering and reporting system. As a result, investors rely to a large degree on data about China from private sources.
The “Beige Book” reported that the weakest sector was, as feared, manufacturing, with only 51 percent of executives reporting revenue gains, a drop of 6 percentage points from the third quarter and a drop of two percentage points from a year earlier. However, the service economy provided a counterbalance, the authors said, with 59 percent reporting rising revenue, a gain of six percentage points from the second quarter and flat for the year.
The authors said investors tend to neglect the rapidly growing but hard-to-measure service sector and overemphasize the importance of manufacturing.
“This is a faulty prism,” they wrote. “Manufacturing performance is neither a microcosm of the Chinese economy writ large, nor its bellwether.”