Declining electricity usage, falling shipping volumes and directionless tax revenues paint a bleak picture for Chinese growth, warns Australian Ethical.
Australian Ethical international equities portfolio manager Nathan Lim says China's economic indicators are largely weakening or directionless.
Three indicators in particular have "heightened" the fund manager's risk assessment for the region.
First, electricity usage for the February/March period was only up 0.9 per cent versus the same period last year.
"This is well off the mid-single-digit growth it had held for some years," Mr Lim said.
However, he acknowledged that the connection between Chinese electricity usage and economic growth has diminished in recent years.
"China has pivoted its economy away from direct investment and manufacturing, so the slower growth rate is not as alarming as it seems," Mr Lim said.
The second indicator that is causing Australian Ethical alarm is the fact that tax collections for the February/March period were unchanged versus the same period in 2014 – breaking its "longstanding trend of solid mid-single-digit growth".
"The absence of growth [in tax receipts] is more disturbing [than the electricity decline] because it suggests China's transition is leading to an economic contraction," Mr Lim said.
But most concerning of all to Australian Ethical is the fact that shipping rates between China and its main trading partners is "plummeting".
"The Shanghai Shipping Exchange freight index has fallen nearly 17 per cent since mid-February and is now at levels not seen since 2011," Mr Lim said.
"The glut in global shipping capacity is already well known in the market so the sharp fall in rates cannot be explained solely by overly zealous shipping executives.
"In the context of directionless manufacturing indicators, falling electricity usage, and shrinking profits[, and] falling shipping rates points to poor demand conditions.
"Said differently, there is too much supply because China is demanding less as its economy might be stalling," he said.
Australian Ethical still assesses China as 'neutral', but the fund manager sees "rising risks to the downside", Mr Lim said.
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