Weakness in capital spending and a decline in companies applying for credit are two signs that China’s economic slowdown is deepening, Bloomberg News reported, citing the latest China Beige Book.
According to the report, published quarterly by New York-based China Beige Book International, half of businesses reported higher investment, the smallest proportion and the sharpest drop since the survey began 10 quarters ago.
Also, fewer companies than in the previous survey in March said they expect to increase investment in the next quarter and the proportion that anticipate cutting spending increased.
The slowdown is weighing on hiring and wages, and interest rates offered by shadow lenders fell below levels offered by banks, the report said.
Meanwhile, the number of businesses applying for bank loans also dropped and fewer bankers reported increased lending to businesses in the quarter, confirming companies’ reports of a credit squeeze, the survey said.
“Since investment has been the engine of the economy for the past seven years, this weakness has sweeping effects on sectors, regions and gauges of firm performance,” Leland Miller, president of China Beige Book International, and Craig Charney, director of research and polling, said in a statement. “Overinvestment has been an addiction and withdrawal symptoms will not be pretty.”
The country’s slowing economic expansion may prompt Premier Li Keqiang to boost stimulus measures to meet his 7.5 percent growth target for this year, Bloomberg News said.
Li promised last week that the economy will not experience a hard landing and the government is making adjustments to support expansion.
For the first time since the China Beige Book survey began in 2012, no sector showed an improvement compared with the previous quarter, the report said. Transportation, mining and retail slowed and services weakened more sharply, it added.
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