Chinese firms show resilience in third quarter: private survey

Sun Sep 20, 2015 8:32pm EDT
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SHANGHAI (Reuters) - Profit margins at Chinese firms improved in the third quarter while loan demand remained weak, a private survey showed , with the overall results suggesting the stock market crash would have minimal impact on the broader economy.

The quarterly survey of over 2,100 businesses by China Beige Book International (CBB) showed continued robust growth in the service sector but persistent weakness in manufacturing.

Still, while revenue growth slowed quarter-on-quarter, and only 38 percent of firms surveyed planned to hire more staff in the fourth quarter - down 4 percent on the year - the authors emphasized the relative resilience of the corporate sector heading into year-end.

"Q3-15 was hardly a game changer...the broader collapse assumed by disciples of the PMI has strikingly little basis," report authors Leland Miller and Craig Charney wrote, noting that firms also reported falling real interest rates.

"In fact, there is very little to distinguish Q3’s revenue performance from many previous quarters, calling into question August’s global market sell-off that most attributed to China’s sudden 'fragility'," they said.

The relatively sanguine views of the Beige Book report contrasts with the recent string of weak economic indicators, which have raised fears of a deepening economic slowdown in China and in part prompted the U.S. Federal Reserve last week to hold off from delivering its first rate hike in almost a decade.

A stock market crash has further dimmed investor sentiment, which remains fragile despite a flurry of stimulus measures including several interest rate cuts as Beijing stepped up efforts to support an economy growing at its slowest pace in decades.

HOPEFUL SIGNS   Continued...

Employees work along a production line of a textile factory in Suzhou, Jiangsu province, China, June 13, 2015. REUTERS/China Daily