China’s economy isn’t as weak as it may look, according to a private survey from a New York-based research group that says it’s a myth the nation’s slowdown is intensifying.

“No collapse is nigh” in the aftermath of the stock market plunge and currency devaluation, according to the third-quarter China Beige Book, published by CBB International and modeled on the survey compiled by the Federal Reserve on the U.S. economy. Capital expenditure rebounded slightly in the period and the services sector showed strength, the report said.

“Perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy,” CBB President Leland Miller wrote in the report. “Global sentiment on China has veered sharply bearish--too bearish. While we have long cautioned clients against relying on rosy official views of the Chinese economy, we believe sentiment has swung substantially too far in the opposite direction.”

The report describes a mixed, rather than disastrous, picture of the world’s second-largest economy. Weakening exports, deepening factory-gate deflation and a manufacturing slowdown have highlighted the risk of this year’s expansion undershooting Premier Li Keqiang’s target for growth of about 7 percent.

The survey’s findings contrast with deepening skepticism over China’s outlook and policy makers’ ability to steer the economy. Fed Chair Janet Yellen last week referred to concerns about the "deftness" of China’s response to downside risks, while Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein called the handling of its stock market collapse "ham-handed."

David Fuller's view

I would be far more sceptical of this Beige Book if it had been published by China’s government, but clearly it was not.  

China’s slow GDP growth and mismanaged stock market has been at the centre of global investors’ concerns over the last two months.  However, bubbles in the mainland indices such as China A-Shares (p/e 15.67, yield 1.95%) have been largely deflated and Hong Kong listed shares remain cheap, evidenced by the Hang Seng Index (p/e 9.32, yield 3.93) and the Hang Seng China Enterprises (H-Shares) Index (p/e 7.05, yield 3.96%).  Medium to longer-term recovery potential for these last two Indices should be considerable.