New | Credit squeeze raises recovery doubts

Tight credit is constraining economic recovery on the mainland, with only the manufacturing sector seeing stronger growth at the end of 2013 than it was experiencing at the start of the year, according to the latest findings of the quarterly China Beige Book survey.

The number of firms getting new credit shrank for the seventh consecutive quarter while the proportion of loans going to debt rollovers jumped, meaning that most new bank lending went to repaying existing obligations rather than financing new economic activity.

Only 14 per cent of bankers questioned said 30 per cent or more of their branch lending went to new customers in the fourth quarter, down from 18 per cent in the previous quarter and 40 per cent in the second. Meanwhile, only 33 per cent of firms surveyed said they had applied for loans this quarter, down a hefty 13 points from the third quarter.

"This new data supports and builds on our central theme from the last quarter, namely that the 'strong recovery' so confidently declared by most analysts is in fact a fiction," Leland Miller, president of CBB International, told the "While our new data shows that China's economy strengthened during the fourth quarter, the economy over the course of the full year underwent a clear overall growth slowdown."

Economists forecast that growth broadly remained on track to hit the government's full-year target of 7.5 per cent, despite a patchy year in which growth slowed to a three-year low of 7.4 per cent in the second quarter and from which it has only since managed a mild recovery.