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China Beige Book shows economy slowing amid weakening investment

BEIJING – China’s economic slowdown deepened this quarter, as capital spending showed weakness and fewer companies applied for credit, the Bloomberg news agency reported.

BEIJING – China’s economic slowdown deepened this quarter, as capital spending showed weakness and fewer companies applied for credit, the Bloomberg news agency reported.

Half of businesses reported higher investment, the smallest proportion and the sharpest drop since the survey began 10 quarters ago, according to the China Beige Book, a report published quarterly by New York-based China Beige Book International. The slowdown hurt hiring and wages, and interest rates offered by shadow lenders fell below levels offered by banks, it 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,” Mr Leland Miller, president of China Beige Book International, said in a statement with Mr Craig Charney, director of research and polling. “Overinvestment has been an addiction and withdrawal symptoms will not be pretty.”

The report adds to a picture of slowing economic expansion that may prompt Premier Li Keqiang to boost stimulus measures to meet his 2014 growth target of about 7.5 per cent. Mr Li last week said he “promised” China won’t have a hard landing and that the government is making adjustments to support expansion.

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, according to the report.

For the first time since the China Beige Book survey began in 2012, no sector showed an improvement compared with the previous quarter, according to the report. Transportation, mining and retail slowed and services weakened more sharply.

The survey showed “dramatic differences” between parts of the real estate industry, with commercial and residential realty “pummelled while construction held up fairly well,” the China Beige Book said. Fewer companies in commercial and residential realty reported revenue gains and prices were flat or falling, while commercial construction saw steady price and volume growth and starts “perked up”, according to the report.

The number of businesses applying for bank loans dropped and fewer bankers reported increased lending to businesses in the quarter, confirming companies’ reports of a credit squeeze, the China Beige Book said.

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