China Beige Book Reveals Employment Plunges To 4-Year Low, Capex Worst In History

Tyler Durden's picture

Back in December, New York-based China Beige Book International released what they called a “disturbing” set of data that pointed to pronounced weakness in the Chinese economy.

National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months,” the firm - whose CBB is modeled on the Fed’s survey of US economic conditions and is supposed to provide a more objective assessment of China’s economic health than the goalseeked figures that emanate from the NBS - remarked.

In the three months since the CBB’s last report, we haven’t seen a whole lot in the way of positive data that would have caused us to believe that things are looking up. Exports, for instance, cratered more than 20% in RMB terms last month and 25% in USD terms - the third worst performance in history.

Sure enough, the CBB’s latest quarterly read on the Chinese economy betrays more pervasive problems including a persistent lack of hiring and a disheartening dearth of capex. “Only 33% of firms reported capital expenditure growth in the first quarter, the lowest in the survey's five-year history,” Reuters reports, adding that “the share of firms reporting capex growth has fallen by over 40 percent since the second quarter of 2014.”

The CBB’s survey, which includes 2,200 companies and 160 bankers, showed that although profits have risen, hiring has collapsed to a four-year low and that poses a very real problem for the Party which is perpetually concerned with optics. “The weakness in the job market hits at a paramount concern for the Chinese Communist Party,” WSJ notes, before quoting CBB president Leland Miller, who said the following in the report:

“The party cares very much about the state of the labor market. The first quarter may therefore be one of the rare occasions when investors see the data and react mostly with relief, while the results cause some mild panic back in Beijing.”

“Our data show that firms first stopped borrowing, then cut spending and now are becoming allergic to hiring,” Miller continues.

Right. And if there’s anything the politburo does not need in the current environment, it’s for firms to develop a hiring “allergy.”

As we’ve documented exhaustively of late, China is staring down what may end up being a catastrophic employment crisis as the government must choose between allowing an acute industrial overcapacity problem to sink the entire economy or else move to implement a massive restructuring of elephantine SOEs.

Reforming grossly inefficient government enterprises will likely cost hundreds of thousands if not millions of jobs and if Beijing can’t manage to mitigate the situation by reassigning workers or otherwise providing some manner of social safety net, they’ll be widespread social unrest.

Of course besides the whole “popular revolt”/ “angry coup” issue, mass layoffs also do not bode well for China’s nascent transition from a smokestack economy to an economic model that revolves around consumption and services. As we put it earlier this month, “if, as the PBoC says, China intends to depend on domestic consumption rather than exports to fuel growth, then someone had better get to explaining how exactly it is that hundreds of thousands of recently jobless factory workers are going to be able to power the hoped-for but still nascent transformation.”

On that note, we close with the following from WSJ’s take on the latest CBB survey:

The government’s bid to regear the economy toward consumption and services and away from manufacturing and investment is having mixed results, at least this quarter, the survey found. Revenue growth in services and in retail – especially furniture, appliances and clothing — slowed in the first quarter, while holding steady in manufacturing.

Mission accomplished?

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VinceFostersGhost's picture



how exactly it is that hundreds of thousands of recently jobless factory workers are going to be able to power the hoped-for but still nascent transformation.


It's technical.

ParkAveFlasher's picture

There will be robots programmed to billy club all those Chinese who do not comply with happiness.  Best part is, no down-time!

Arnold's picture

Your robots would become frustrated by not being  able to complete their task, and quit.

Arnold's picture

Hu is number 1?


(alright, I've beaten that into the ground more than enough)

Kirk2NCC1701's picture

Long before Trump, I soured on China, when it became clear that they were NOT going to go to a Gold Standard on their currency, and that they had as many or more Ponzis as we do.

As a results... everybody looks after their own first. Thus, who gives a crap how 'bad' things are for their people? I sure don't.

junction's picture

Let the good times roll.  When China sneezes, the New York City high end real estate market gets pneumonia.

VinceFostersGhost's picture



3% unemployment.....there you go!

_ConanTheLibertarian_'s picture

Ask the US for advise on that.

Firepower's picture

Banksters' solution to The Great Depression was...WW2.

China fears only ONE thing: it's own people when angry at theri rulers.

If Hitlery wins, she'll get The Stoopids to die for her.

Get the white hillbillies a-ready!

Gownna fightfurmurka!


NoDebt's picture

"Just stop counting them!"

Exactly.  Worked in the US, it'll work in China.

Quebecguy's picture

Technical stuff takes precious time to figure out. I have other things to do. 

Just BTFD:

Paul John Smith's picture

I'm so glad China is SO STRONG that they are ready to take over the world and be the reserve currency ...

(per Jim Willie)

(except that probably ISN'T going to HAPPEN)

(just like Japan DIDN'T, per 1980's alarmist bullshit, "take over the world")

(so sorry your safe haven fantasies don't work out)

(seems you will have to shelter in place)

NoDebt's picture

In the short time you've been here I find myself agreeing with you a lot.

It is a bit tough to claim a reserve currency status when you peg it tightly to another reserve currency (the dollar).  When are they going to take off the training wheels and put on their big boy pants?  Never, as long as they are an export-dominated economy, would be my guess.

Arnold's picture

That calls for a Devaluation!!!!!!!!

SallySnyd's picture

Here is an interesting article that looks at how China has threatened the United States over its recent moves in the South China Sea:


We can only hope that cooler heads prevail in Washington before we end up with another world war.


lakecity55's picture

There must be lots of goodies under the ocean area China is muscling in on. I would suppose fishing, obviously, but also oil, gas and mineral products under the sea floor.

goldhedge's picture

This is not Uncle Sam's backyard. Gtfo

Bazza McKenzie's picture

As soon as the Chinese government finds out who are the participating firms and bankers in the survey this will be fixed -- and perhaps a few individuals disappeared.

Arnold's picture

Much as we mirror Japan's economic history,

The chinks may look as US and the boom brought on by the loss of manufacturing capacity.



i_call_you_my_base's picture

Indeed, but with 700mln pissed off people instead of 200mln.

Infinite QE's picture

Sheesh, with the billions they pay GS in fees, you think they'd learn how to keep their unemployment stated rate below 5%.

Grandad Grumps's picture

“Our data show that firms first stopped borrowing, then cut spending and now are becoming allergic to hiring,” Miller continues. <<

Well, duh ... if the problem is debt, then just like the US consumers, they will stop the problem in the only way they know how.

Spungo's picture

Now watch as Chinese follows exactly the same steps Japan did. Bailout after bailout, followed by 20+ years of deflation and stagnation.

Infield_Fly's picture
Infield_Fly (not verified) Mar 28, 2016 8:01 AM

Tick Tock China.


Communists fuck up again.  What else is new?

Kirk2NCC1701's picture

<-- China

<-- Chosenites

Between the two, on whom would you place a Vegas bet, as to who will do better at global financial dominance?

Sudden Debt's picture

the number of unpaid salaries in China is even bigger.

On average, they're 3.2 month behind.

I wonder how Americans would deal with that. What was the average savings account of an American again? a 1000 bucks?

So now try to imagine how desperate Chinese workers must feel even when they work 6/7 12 hours a day.