China's decline in services offsets manufacturing growth in economy
China’s economy is not as healthy as recent data suggests with growth coming from manufacturing and property being overtaken by services and retail tapering off, Reuters reported on Thursday.
According to a quarterly survey of more than 3100 firms by China Beige Book International (CBB), manufacturing experienced its fastest expansion nationally with 53% of companies reporting revenue gains, which was 3% higher than the previous year.
Aside from government infrastructure building and the housing boom giving a boost to the “old economy” firms, like steel mills and cement makers, foreign orders also improved.
The “new economy” sectors on the other hand, such as services, transportation and retail, showed a slow-down both quarter-on-quarter and year-on-year with cash flow and profits deteriorating.
Retail firms experienced one of their weakest performances in the history of the survey as e-commerce firms took up more of the market share.
Official data in August raised expectations that the economy would stabilise and recover with industrial output, retail sales and property investment all growing more than expected and industrial profits growing at the strongest pace in three years.
Despite the property sector showing strong growth during the quarter there were signs of the real estate boom faltering.
Property sales revenue was uneven across the country and weakening companies’ cash flow prompted more borrowing, raising concerns about rising debt levels. More cities also tightened restrictions on home purchases as prices soar.
In the services sector growth weakened in every area except for hospitality. Retailers with only brick-and-mortar stores saw no net revenue in this quarter.
"Struggling retail and a property bubble is not the kind of stability many are touting," the report said.