Health & Fitness

China's restoration isn’t as rosy because it appears – however there may be nonetheless "room for optimism"

chinas-restoration-isnt-as-rosy-because-it-appears-however-there-may-be-nonetheless-room-for-optimism

SINGAPORE – China's recovery is not as rosy as one might think – although the world's second largest economy has recovered from a coronavirus-induced slowdown, according to research firm China Beige Book CEO Leland Miller.

China has rebounded but there is no improvement from last year, Miller stressed, adding that the recovery is not evenly spread across the economy.

"The recovery itself is actually two-pronged, and you can see that the larger cities and coastal areas are doing much, much better than the rest of the country," he told CNBC on Friday.

"So there are really two recoveries – Beijing wants to promote the recovery in Beijing, Shanghai and Guangdong, but that is not most of China," he said, adding that the rest of China is seeing a far more subdued recovery.

VCG | Visual China Group | Getty Images

The US-based China Beige Book, which conducted an independent quarterly survey of more than 3,300 companies in China between August 13 and September 12 this year, found that growth is intact in the country's richer coastal regions.

However, the analysis also found that revenue and profits in each region fell double-digit year-over-year in the third quarter. It also found that in most of the country's inland provinces, production and domestic orders were down from the previous quarter.

Worry that borrowing has slowed down

Miller also said companies aren't borrowing as much as they should – a worrying sign.

"If you look at what's also happening in the credit markets, a lot of these companies, especially services but retail, too, aren't borrowing as much as you'd think," he said.

If you get out of a coronavirus disruption or slowdown, we should see a lot more credit. Since this is not the case, you have to wonder what companies they see that makes them hesitate.

Leland Miller

CEO of China Beige Book

Small and medium-sized businesses are borrowing much less than they did in the second quarter, Miller said.

"That shouldn't be happening. If you get out of a coronavirus disruption or slowdown, we should see a lot more credit. Since it doesn't, you have to wonder which companies they're seeing, which makes them hesitate," Miller added .

China was the first country to be affected by the coronavirus pandemic. After shutting down most of its economy to contain the spread of the outbreak, the country posted a 6.8% decline in the first quarter.

When the outbreak got under control, businesses reopened and the country's GDP rose 3.2% in the second quarter.

The golden week gives room for optimism

However, last week's National Day celebrations, known as Golden Week, have created "room for cautious optimism," according to Benjamin Cavender, chief executive of China Market Research Group.

"If you look at the travel numbers – 600 million trips taken this week this year is still less than about 800 million last year. So the numbers at first glance still look lower, but they do come back." he told CNBC Friday. "Retailers and tour operators are really going to see this as an asset now."

During that period, tourism revenue was 466.56 billion yuan ($ 69.5 billion) – with 637 million local tourists, ANZ Research said, citing data from the country's Ministry of Culture and Tourism.

"This suggests that the consumer sector, the final part of the recovery story, is accelerating," the company said in a note on Friday.

– CNBC's Evelyn Cheng contributed to this report.

0 Comments
Share

Katherine Clark