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Rising business confidence bodes well for full-year growth goal

2014-06-26 14:34:43Source:China DailyAuthor:

Demand for loans weakens in the second quarter, says PBOC study

More Chinese entrepreneurs and bankers believe the economy slowed in the second quarter than in the first and demand for loans has weakened, a central bank survey showed on Wednesday.

The "heat" reading of the macroeconomy was down 0.6 percentage point quarter-on-quarter and also down 0.4 percentage point year-on-year, according to the People's Bank of China.

About 36 percent of entrepreneurs said the economy has been cooling in the second quarter, while 62.2 percent said it was at a normal level.

The survey also showed the number of bankers who consider monetary policy was appropriate increased from the first three months of the year.

But according to a report by international accounting firm Grant Thornton LLP, Chinese enterprises' outlook for revenue, profitability, product prices, exports and employment all rose quarter-on-quarter, the firm said in its International Business Report.

Planned investments also rose, indicating much stronger willingness by businesses to expand, the report showed.

"Chinese businesses were rather prudent in the first quarter, especially when it came to making investment plans. Their growth prospects obviously improved in the second quarter, and the country's economic development is expected to regain momentum in the second half of this year," said Xu Hua, chief executive officer of Grant Thornton China.

Second-quarter figures suggest that the economy has stabilized after a package of mini-stimulus measures were introduced by the central government.

The central bank has taken targeted measures to support the economy, including cutting reserve requirement ratios for selected banks, while the government has unveiled a flurry of measures to boost activity in certain sectors, dubbed by some economists as a "mini-stimulus program".

Although businesses' economic outlook didn't change, companies' views of their own prospects improved, according to Grant Thornton. Those expecting an increase of revenue totaled 61 percent (up 30 percentage points), and those expecting stronger profitability totaled 47 percent (up 30 points).

The survey also found that 37 percent of the companies expected higher product prices, 36 percent expected more exports and 36 percent planned to add staff, with all indicators up by at least 20 percentage points over the previous quarter.

Manufacturers' performance is closely correlated with that of the broader economy. According to the survey, expectations for revenue and profitability increases among manufacturers stood at 48 percent and 39 percent, respectively.

The percentage of businesses concerned about a shortage of orders stood at 33 percent, the lowest point in the past two years.

Prospects for European and US growth will facilitate exports from China. According to the General Administration of Customs, exports rose 7 percent year-on-year in May, a significant improvement from recent months,

"We believe that with further economic stability, Chinese businesses will see stronger momentum in their development," said Xu.

Li Fang, a senior manager at a plastics and molding plant in Ningbo, Zhejiang province, said the plant aims to increase production capacity in the second half to cope with rising orders from Europe.

Grant Thornton found that globally, business optimism has risen to 46 percent. The surge in optimism is being driven by increasing confidence in the European Union (at 43 percent, the highest since 2006), North America (at 73 percent, the highest since 2004) and the Group of Seven (at 53 percent).

The data suggest that the developed economies have maintained a strong recovery trend.

Also, Indian businesses are the most optimistic worldwide (86 percent). Ireland, the United Kingdom and Germany occupy three of the top four positions for optimism, and all these three economies are expecting to see big export growth.