China’s economy may be headed for another low

China’s economic numbers in the last few months have disappointed expectations but the worst is not over — analysts are expecting third quarter data to come in even weaker than than before.

A quarterly survey by China Beige Book released Wednesday showed that growth slowed in the third quarter while debt levels soared.

“Nationally, revenue, profits, output, sales volumes, and job growth all slowed from a quarter ago, as did both domestic and export orders,” the report said, citing China Beige Book’s survey of more than 3,300 Chinese businesses.

Critically, the firm found that debt levels remain on the rise, with bond issuance climbing to its highest in the history of the survey.

The ratio of the so-called “shadow banking” to overall borrowing was also at the second-highest on record. Shadow banking refers to unregulated lending activities that are often present higher risks as they are subjected to less regulatory oversight.

“Borrowing is still high. This could offer some relief next quarter. Any fears of further labor market stress could result in Beijing pushing firms to staff up as credit is doled out,” Shehzad Qazi, managing director of China Beige Book International said in an email. “That said, any comparison (in economic growth) with very weak Q418 will look comparatively better than it should.”

Last year, China’s official numbers — which are frequently doubted — showed fourth-quarter growth came in at 6.4%, dragging the annual rate to its slowest since 1990 at 6.6%.

At the start of this year, the pace of growth held at 6.4% in the first quarter, and dropped to 6.2% in the second. China is expected to release third-quarter gross domestic product in mid-October.

Yuxian Zhang, director general at the State Information Center’s economic forecasting department, also said the third quarter would mark a low point for China this year.

His reasoning is that government policies didn’t really come into play in the first half of the year, and the effect of supportive measures such as tax cuts will take time to be felt, according to CNBC’s translation of Zhang’s Mandarin-language remarks at a press event last week.

Zhang expects gross domestic product to increase 6.1% in the third quarter and 6.2.% in the fourth, bringing the annual total to between 6.2% and 6.3%.

Percentage points aside, it’s unclear how effective the Chinese government will be in its efforts to balance supporting the economy with reducing reliance on debt for growth.