China’s economy was plagued by pervasive weakness in the fourth quarter, results from a private survey of Chinese firms showed, raising questions about the veracity of stronger than expected official activity data released this month.

“The government may not be in the mood to acknowledge officially that the slowdown has worsened, but self-reporting from the nation’s powerhouses will be hard to hide,” report authors Leland Miller and Craig Charney wrote.

The quarterly survey of over 2100 businesses by China Beige Book International (CBB) showed national sales revenue, volumes, output, prices, profits, hiring, borrowing and capital expenditure were all weaker on-quarter, creating more uncertainties for China’s economy.

By raising interest rates on Wednesday, the U.S. Federal Reserve removed one major source of global uncertainty, leaving China’s economic development at the top of investors’ and policy makers’ watchlists.

Economists have questioned China’s economic statistics for years and turn to private surveys like the CBB and measures such as concrete, steel or electricity production to better understand an economy that has grown almost 10 percent a year for 30 years.

“While it is only one quarter, the profit numbers are particularly disturbing, with the share of firms reporting profit gains slipping to the lowest level we’ve ever recorded due to the sharpest on-quarter drop since mid-2012,” the report said.

Every sector surveyed showed worse results this quarter than the last, for the first time in the history of the survey.


The country’s labour market and the impact of inflation – often considered sources of strength in China’s economy – both degraded, the survey showed.

Job growth fell to its lowest level in four years and wage gains dropped, despite labour supply becoming less available, the survey showed. Input and sales prices also hit record lows.

“For the first time, it looked like firms were encountering genuinely harmful deflation,” the report said.

Only 14 percent of firms said they were borrowing, the lowest level ever recorded in the survey, with the proportion of firms that said they were borrowing falling by two-thirds over four years.

“The interest of firms in both borrowing and spending continues to decline, suggesting it’s past time the ‘stimulus mafia’ rethinks its pavlovian responses. Reform or bust,” the report said.

Shipping and transportation construction – sectors that China often targets in fiscal stimulus policy – performed poorly in Q4, the survey showed, with slowing revenues and employment and “entirely disappearing” profits, raising doubts about the efficacy of fiscal intervention.

Revenues in transportation construction slowed dramatically, according to 33 percent of respondents and shipping contracted outright, with 39 percent of respondents saying revenues were down.

But China’s official activity data released on Saturday painted a different picture. Factory output growth picked up to a five-month high and retail sales and growth in China’s fixed-asset investment were both higher than expected.


By Adam