China’s corporate borrowing soars and cash flows deteriorate - independent survey

China's fourth-quarter economic growth may have been "the weakest of 2019" - but it still showed an improvement compared to the previous quarter and to the same period a year ago, a business survey showed.

Manufacturing and services saw the strongest revenue improvement compared to the the previous quarter, though profit was "muted," according to research firm China Beige Book's quarterly review of the world's second-largest economy, which was based on a survey of more than 3,300 Chinese businesses.

Three important results emerged from the survey.

First, there are signs that cash flows have deteriorated quickly. "It is easy to discount a seemingly unceasing trend of worsening cash flow, since it in some ways is a feature of the system. But even by Chinese standards, Q4 late payables and deliverables soared-to the worst levels we've recorded," the report said.

Secondly, new orders continue to fall even though companies are reporting higher revenue in the fourth quarter. "Demand may not hold up," the report said, adding that "firms may not yet have understood the message their customers are sending."

Finally, the economy saw record levels of corporate borrowing in the fourth quarter, the survey showed. "Loan applications nationally shot to an all-time high, while rejections sank to an all-time low," according to the China Beige Book. "For the first time since 2012 we saw each of our four core sectors-Manufacturing, Retail, Services, and Property-report over 30% of firms borrowing."