Chinese firms see broad-based recovery in Q2: survey

[SHANGHAI] China's economy saw a broad-based rebound in the second quarter, results from a private survey of Chinese firms showed, supporting official claims that the world's second-largest economy is beginning to turn around.

The report, produced each quarter by China Beige Book based on a survey of over 2,000 firms in different sectors and geographic regions, said the rebound was driven by several factors.

"Among major sectors, two developments stand out: a welcome resurgence in retail - which saw rising revenue growth despite a slip in prices - and a broad-based rebound in property," report authors Leland Miller and Craig Charney wrote, adding that manufacturing, services, real estate, agriculture and mining all saw both year-on-year and quarterly gains.

The only exceptions were shipping and travel, which decelerated.

The report highlighted another welcome trend: a recovery in prices and profits after months of producer price deflation.

The data showed that 45 per cent of respondents saw profit margins gain on-year, and 37 per cent of respondents reported an uptick in sales prices for their products or services.

"The rate of climb is still slower than a year ago, but this at least represents a break from the seemingly impossible tide of price deterioration." The report said one of the reasons the recovery did not show up in media reports or official statistics is that it was primarily driven by firms in the centre and southwest regions of China, while the developed coastal business centres led by Beijing, Shanghai and Guangdong province posted no or negligible improvement.

The labour market also improved, the survey said, with stable wages resulting in a "temporary labour market sweet spot"for Chinese companies.

The survey follows other tentative signs of improvement.

National housing data, for example, showed home prices rose in May for the first time in 13 months. Although economists are divided on how much help it can bring, it does signal at least the beginning of a bottom in the market.

There were still signs of concern, in particular the weak recovery in capital expenditures, which remained tepid despite a massive stock rally which would ordinarily stimulate more investment by firms.

"This is not 'China is bouncing back and its problem is ended,'" said China Beige Book president Leland Miller. "On the other hand what you are seeing in this data is exactly what you want to see in terms of signs of recovery."

REUTERS