Here’s a warning for China’s economy

beijing — Recent economic data offers a “warning for 2018” now that Chinese leaders are less motivated to prop up growth in the wake of their Congress in October, according to the China Beige Book.

“Incentives to ensure the economy was growing smartly at the time of the Communist Party Congress do not apply as next year wears on,” CBB president Leland Miller and chief economist Derek Scissors said, in a report released on Wednesday.

Fourth-quarter results already show some signs of a transition to slower growth, according to a private survey by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve’s Beige Book.

“None of these is genuinely alarming yet, and none would be out of place in a typical quarter,” Miller and Scissors wrote. “But the first results after a CPC are not a typical quarter. If you expect a noticeable slowdown in 2018, the first post-Congress returns support those expectations.”

At the 19th Party Congress, which marked the start of President Xi Jinping’s second five-year term, top leaders signaled less emphasis on pursuing economic growth at all costs. This month, at their main economic planning conclave to set priorities for 2018, they pledged to focus on “critical battles”

revenue, capex and hiring are inferior to manufacturing, while inventory growth is much higher

Leland Miller and Derek Scissors,

against financial risk, pollution and poverty in coming years.

Evidence from the retail sector doesn’t support the government’s claims of a consumption boom, CBB said. While some large firms have strong sales and profitability improved this quarter, retail revenue growth finished last among major sectors, Miller and Scissors wrote.

“Retail’s performance is decidedly uninspiring,” they said. “Revenue, capex and hiring are inferior to manufacturing, while inventory growth is much higher.”

Overall hiring held up and was generally in line with the prior quarter, with 48 per cent of firms staffing up and three per cent cutting workers. “Job growth remained stronger at state firms than private, regardless of company size,” CBB’s survey found.

Inflation in wages, prices, and input costs were also roughly the same as in the prior quarter, and were moderately faster than last year, the report said. Profit growth improved. — Bloomberg

President and chief economist at China Beige Book