Chinese firms improve profit margin in 3Q: Survey
22 Sep 2015
Chinese firms improved profit margins in the third quarter even as loan demand continued to be weak, according to a private survey, with the overall results suggesting the broader economy would be only minimally impacted from the stock market crash.
The quarterly survey of more than 2,100 businesses by China Beige Book International (CBB) pointed to continued robust growth in the service sector even as weakness persisted in the manufacturing sector.
However, even as revenue growth slowed quarter-on-quarter, with only 38 per cent of firms that were surveyed planning to hire more staff in the fourth quarter - down 4 per cent on the year - the authors stressed 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 upbeat report in the Beige Book runs counter to the weak economic indicators, that had raised fears of a deepening economic slowdown in China and partly stayed the hand of US Federal Reserve last week from delivering the first hike in almost a decade.
Current market perceptions of China are "thoroughly divorced" from the reality on the ground, according to the latest China Beige Book (CCB) survey, which has found that while the economy slowed in the third quarter, there are no signs of an impending growth collapse.
"In the aftermath of the stock market collapse and a surprise currency action in August, global sentiment on China has veered sharply bearish - too bearish," Leland Miller, president of CBB said, CNBC reported.
"While we have long cautioned clients against relying on rosy official views of the Chinese economy, we believe sentiment has swung substantially too far in the opposite direction," he said.
The private sector survey, polled over 2,100 companies across the country in a variety of sectors, ranging from retail to real estate.
Corporate revenue growth, which came in weaker than the second quarter, showed an uptick over the first quarter, and was stable in on-year terms, according to CBB.