China Beige Book shows broad improvement across all industries

[BEIJING] The world's No 2 economy showed improvement in the fourth quarter with gains across all industries, according to the China Beige Book.

Revenues, profits, jobs and capital expenditures improved from the third quarter while new orders were stable, according to the private survey released by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve Beige Book. The New York-based research group also said deteriorating corporate cash flow remains a risk in the year ahead."Growth metrics improved virtually across the board," CBB president Leland Miller and chief economist Derek Scissors said in a report.

Economists raised growth estimates this month as the country's top leaders gathered in Beijing to map out policies for next year. Policy makers said after their Central Economic Work Conference that they plan prudent and neutral monetary policy and proactive fiscal policy next year. They also pledged to prevent and control financial risks to avoid bubbles.

CBB said wage growth increased in the fourth quarter, with 51 per cent of companies reporting raises while 3 per cent reported cuts. Hiring continued.

Retail led all sectors in quarterly improvement in both sales and profit, yet its capital expenditures lagged other industries, suggesting they don't believe the bounce is durable, CBB said. Services strengthened and pricing improved. Property revenue growth improved while transportation construction led gains in the real estate and building sector.

For banks, borrowing dipped for the quarter but remained robust year-over-year. Borrowing costs jumped at banks while slipping at shadow lenders. Credit availability dwindled, according to CBB's survey of more than 3,300 firms and 160 bankers across the country.

Economists have raised projections for 2017 full-year expansion to 6.4 per cent from 6.3 per cent in September, according to a Bloomberg survey. The official factory gauge probably remained near a post-2012 high in December, edging down to 51.5 from 51.7, forecasters said before the release of the manufacturing purchasing managers index on Jan. 1.

With producer prices rising again after four years of deflation and the Federal Reserve raising interest rates again, China won't soon export inflation, Mr Miller and Mr Scissors said. Services and property are driving inflation results in the survey, but property isn't exported and the country is a services importer, they wrote.

BLOOMBERG