(Bloomberg) -- China’s economy showed “an unmistakable first-quarter recovery” after a weak end to 2018, though the level of new borrowing casts doubt on the sustainability of the rebound, according to the China Beige Book.
“The recovery extends across both sectors and geographies, with every major sector and each one of our regions showing better revenue results than Q4,” CBB International said in a report based on survey data. “Yet this rally didn’t appear out of nowhere, and there are at least three compelling reasons to doubt its staying power: credit, credit, and credit.”
Economists had forecast a bottoming-out of the economy’s growth slide as early as the first quarter, on the back of a string of government stimulus measures including credit easing since last year. At the same time, a deteriorating global trade outlook and falling factory prices pose risks even as domestic consumption remains relatively robust.
Reports of company borrowing matched the highest level since mid-2013, while loan applications continued to rise and rejection rates plumbed all-time lows, the report said.
The Beige Book authors point to a resurgence in shadow-bank financing, which Beijing had previously been trying to curb, as one reason behind the uptick in activity. The cost of credit is however surging, according to the report, with firms reporting the second-highest overall interest rates in CBB data going back to 2012.
To contact Bloomberg News staff for this story: Jeffrey Black in Hong Kong at jblack25@bloomberg.net
To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Enda Curran
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