There is clearly a pattern of weaker economic releases out of China over the past three months and with the quarterly survey called the China Beige Book – an update on the strength or weakness of the economy – there is evidence is growing that things are not good in the Middle Kingdom. The report released Wednesday showed that growth is slowing and debt levels are rising rapidly. This survey covers over 3,300 Chinese businesses and it is obvious that economic output, profits, and revenues as well as export orders are showing signs of weakness.
There is a “shadow banking” business in China that is higher risk than regular banking and is put plainly as unregulated lending – this is increasing as well. Borrowing is high and with higher debt levels and a slowing economy the leaders in Beijing are working to stimulate the economy. And it is this stimulation that is important to help generate economic activity to pay off debt as according to the China Beige Book, nearly every firm in manufacturing has borrowed this year. More on this topic in the coming week, as it is tied to the trade war.