BEIJING－The picture of China's economy slowing in the second quarter is misleading, or even inaccurate, with retail sales and investment actually stronger than the official data show, according to the China Beige Book.

"The retail sector may be seeing a turn higher, with profit and investment growth improving," CBB said in a report, adding that slowing seen in official data in May reflects not the current situation but weakness seen earlier this year and late last year. "The sector may already be emerging from the troubles Beijing is just now introducing publicly."

Similarly for investment, official statistics are lacking as they undercount retail spending, according to the private survey by CBB International, which collects anecdotal accounts similar to those in the US Federal Reserve's Beige Book.

Including this shows capital spending is healthy in most sectors, the report said, noting that official fixed-asset investment "reflects only part of the story－panning the camera to a wider angle shows strong capex in multiple sectors".

The picture of China's economy slowing just as trade disputes with the US heat up has prompted growing concern, with stocks falling and the central bank stepping in last week to boost credit to smaller companies and help firms deal with debt.

Analysts expect the bank to further ease policy to help cope with slowing growth and offset the effects of a crackdown on shadow banking. However, while non-bank shadow institutions are being squeezed for money, the Beige Book reports that companies are still borrowing heavily, and interest rates have fallen, which should lower repayment costs.

Corporate borrowing was higher when compared to both the first quarter and the same period in 2017, according to the report, while "interest rates fell nationally to lower than a year ago in every major subsector", it said.

One area of concern was manufacturing, with the report noting that "a trade conflict with the US would hit what is already metastasizing into a sore spot for the Chinese economy". The immediate problem is that manufacturing and commodities export orders in the quarter showed considerable weakness, and the outlook is worse, the report said.

Notably, the situation for steel deteriorated.

"The share of steel firms reporting improved conditions fell hard in every major category, from revenue and profit growth to output, investment, and hiring," CBB said.

"After nine quarters of record profit-making, and expanding production to take advantage of it, steel may be nearing a turn."

Bloomberg