Several Chinese firms are choosing to forgo expanding their workforce after posting a 40 percent drop in their capital expenditure since the second quarter of 2014, according to a new survey.
Data analytics company China Beige Book International (CBB) reported that out of the more than 2,200 companies that it has surveyed in the previous quarter of 2016, only 33 percent of them experienced growth in their capex. This is the lowest percentage the CBB was ever able to get in its survey in its five-year history.
Despite this, the report also showed that profits had improved in the first quarter of this year compared to those of the previous quarter. CBB also found that companies have begun to steady their revenue growth.
"It's unclear whether the economy as a whole weakened again in the first quarter," the authors of the CBB survey said. "But policy challenges appear to have grown, and Beijing therefore may perceive the economy as weaker."
Some economists have begun to doubt the official statistics the Chinese government has provided in the past, causing them to hire private firms, such as CBB, to get more accurate surveys.
They have also turned to measures such steel, electricity and concrete production in order to have a better gauge of the various changes in what is considered to be the second-largest economy in the world.
Zhang Gaoli, the vice premier of China, had reported during an economic conference last week that the economy is already improving that based on recent data.
The latest survey revealed that factory output during January and February of this year has improved since reaching its weakest pace in 2008. Exports and imports, on the other hand, continued to drop.
The development of property investment in China has allowed to fixed-asset investment to grow enough to surpass expectations.
As far as labor force expansion goes, only 23 percent of companies were able to hire more people in the first quarter, which failed to even reach half of the figure the CCB reported in its first survey in 2012.
The authors of the CBB report said that a reduction in borrowing and spending was needed following the excesses recorded in 2009 to 2010. However, the reduction in hiring serves as a pointed issue.
Photo: Richard Fisher | Flickr
