Surveys suggest decreasing confidence in economy

Updated: 2012-06-20 09:24

By Wang Xiaotian (China Daily)

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Surveys suggest decreasing confidence in economy

Quarterly surveys conducted by China's central bank suggest that domestic enterprises and bankers have become less confident in the world's second-largest economy even though the authorities have launched stimulus measures.

The People's Bank of China reported on Tuesday that an index meant to gauge 5,700 industrial companies' confidence in the economy stood at 67.5 percent in the second quarter of the year, down by 2.7 percentage points from three months earlier and 8.3 points from a year earlier. Another confidence index gauging the opinions of executives from more than 3,000 lenders fell by 6.6 percentage points to 58.4 percent, the central bank said.

The figures came after China saw its economy grow at a rate of 8.1 percent in the first three months of this year, the slowest rate in nearly three years. And the official purchasing managers' index, an indicator of the nation's manufacturing activity, showed its weakest reading for the year in May.

About 30 percent of the surveyed entrepreneurs said they think the macro economy is "too cold", up by 2.7 percentage points from the first quarter. Nearly 39 percent of the bankers surveyed held the same opinion, an increase of 9.4 points.

The proportion of entrepreneurs who believe the economy is "normal" went down by 1.7 points to 65.4 percent, and that of bankers who hold the same views decreased by 6 points to 55.2 percent.

A separate survey conducted by the central bank in the second quarter of the year found that residents' employment expectations then dropped to nearly their lowest point since 2009, and that they have become less confident about their future income.

Even so, inflation expectations for the third quarter of this year have increased among Chinese households. Nearly 36 percent of the 20,000 households surveyed in 50 cities said they believe consumer prices will increase, up by 4.2 percentage points from three months ago.

The prediction is at odds with the trend shown by the consumer price index.

The index, a gauge of inflation, stood at 3 percent in May, the lowest level in nearly two years.

Even though more people foresee inflation in the near future, many respondents also said they think monetary loosening will be used to shore up the economy.

More than 32 percent of the bankers who were surveyed said monetary policies will be further loosened in the third quarter, up by 25.7 points from the second quarter.

And 58 percent of the bankers surveyed said they think the country's monetary stance in the third quarter will stay at an "appropriate" level, down by 9.5 points from the second quarter.

Wang Tao, head of China economic research at UBS Securities Co Ltd, forecast the economy will rebound in the next few months, driven by growth in investment after China takes steps to spur infrastructure construction and banking loans.

She said the economy's rebound in the second half of the year will be stronger than expected and that the GDP growth rate for the year will be about 8.2 percent.

"If the scale of capital outflows significantly expands, the central bank may need to again cut the reserve requirement ratio," Wang said.

"And if the real economy (such as manufacturing) is still dim in the third quarter, it may cut interest rates again."

wangxiaotian@chinadaily.com.cn