The latest China Beige Book survey takes issue with the perception of a Chinese economy on the verge of collapse.
The survey, based on the Federal Reserve’s Beige Book on the state of the U.S. economy and composed of assessments by more than 2,100 companies across China along with interviews of key private sector individuals like executives and bankers, concluded instead that the violent market swings have been caused by a misunderstanding of how the Chinese economy operates.
“Perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy,” wrote China Beige Book President Leland Miller. “Global sentiment on China has veered sharply bearish – too bearish. While we have long cautioned clients against relying on rosy official views of the Chinese economy, we believe sentiment has swung substantially too far in the opposite direction.”
While manufacturing has weakened this year, Miller denied that this was particularly unsettling, saying that it “is neither a microcosm of the economy nor its bellwether, and performances in other sectors buoyed overall results.”
Instead, the report says that much of the slowing growth could be attributed to the public sector.
And the CBB report throws cold water on deflation concerns, with Miller saying that the official measures of inflation “are being misrepresented.” The report adds that instead of dire deflation, China seems to be experiencing “the best situation for most economies…stable and low inflation.”
Fears over China’s economy were one factor in the Fed’s decision last week tohold off on increasing interest rates.
China’s stock indexes were up at the end of trading Monday, with the Shanghai Composite up 1.9% and the start-up-focused ChiNext index up 4.7%.