Services sector holds up, manufacturing weak
Corporate profit margins in China improved in the third quarter while loan demand remained weak, with the overall results suggesting the stock market volatility would have a minimal impact on the broader economy, Reuters reported on Monday, citing a private survey.
The quarterly survey of more than 2,100 businesses by China Beige Book International showed continued robust growth in the services sector but persistent weakness in manufacturing.
Revenue growth slowed quarter-on-quarter, and only 38 percent of companies surveyed planned to hire more staff in the fourth quarter, down 4 percentage points year-on-year. But the survey emphasized the relative resilience of the corporate sector as the year winds down.
"The third quarter was hardly a game changer ... the broader collapse assumed by disciples of the (Purchasing Managers Index) has strikingly little basis," report authors Leland Miller and Craig Charney wrote, noting that firms also reported falling real interest rates.
"There is very little to distinguish the third quarter'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 sanguine views of the report contrasted with the recent string of weak economic indicators, which have raised fears of a deepening economic slowdown in China and in part prompted the U.S. Federal Reserve last week to hold off from delivering its first rate hike in almost a decade.
The stock market turbulence has further dimmed investor sentiment, which remains fragile despite a flurry of stimulus measures as China's economy is still facing strong headwinds.
But the report pointed to some hopeful signs.
Revenue rose at 59 percent of companies in the services sector surveyed in the third quarter, up 6 percentage points on the quarter.
Across all companies, profit margins were up at 47 percent of the companies surveyed, 2 percentage points higher than the second quarter.
Capital expenditure was another bright spot, rising for the second quarter in a row, with 48 percent of firms surveyed reporting increases in capital expenditure, up 3 percentage points on the second quarter.
However, loan demand was extremely weak, continuing a pattern evident for much of the year. Of bankers surveyed, only 36 percent reported a rise in applications, down 11 percentage points from the second quarter. Moreover, the modest rebound in the real estate and construction sector evident earlier in 2015 also appeared to be losing steam.
