China’s Economy Likely Contracted Last Quarter, Beige Book Says

China’s manufacturing, services and property sectors all weakened sharply in the fourth quarter due to Covid disruptions, resulting in a potential contraction in the economy in the final months of the year, a private survey shows.

(Bloomberg) — China’s manufacturing, services and property sectors all weakened sharply in the fourth quarter due to Covid disruptions, resulting in a potential contraction in the economy in the final months of the year, a private survey shows.

Indexes measuring profits, sales and employment at manufacturing and services companies slumped in the last three months of 2022 from the previous quarter and a year ago, China Beige Book International said Monday. The results are based on a survey of 4,354 businesses conducted last quarter. 

Metrics for the property sector, including transactions and prices, plunged close to all-time lows, CBBI said.

The figures imply that China’s gross domestic product likely contracted in the fourth quarter from a year ago in real terms and grew only 2% for the whole year of 2022, CBBI, a provider of independent economic data, said in its report. 

Economists surveyed by Bloomberg predict growth slowed to 2.9% in the fourth quarter and reached 3% for 2022.

“With the ongoing Covid tidal wave, investment sliding to a 10-quarter low, and new orders continuing to get battered, a meaningful first-quarter recovery is increasingly unrealistic,” said Derek Scissors, chief economist at CBBI.

China’s abrupt lifting of Covid restrictions in early December has fueled a surge in infections across the country, adding more uncertainty to the economy’s outlook. 

The faster-than-expected reopening means first-quarter economic activity will also likely be disrupted, although some economists see an increasing possibility of a faster recovery once infection waves peak.

High frequency indicators last week suggested early signs of a rebound in activity in cities like Beijing, where infections likely already peaked.

The CBBI survey showed businesses remaining in distress in the fourth quarter. Companies obtained 46% of their loans from non-bank lenders in the final three months of 2022, up from 33% in the third quarter. 

The rise in so-called shadow banking suggests firms are struggling to qualify for bank credit lines, with the cost of borrowing climbing to the highest in more than a decade, according to the CBBI report. 

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.

Close Bitnami banner
Bitnami