China’s Economy: Has Business Confidence Improved?

Business confidence in China has climbed up this quarter although the demand has continued to slow down, according to Capital Economics.

Some people think that property prices are excessive now than a few months ago but few see themselves buying in the near future says Capital Economics.

Quarterly surveys published by the People’s Bank, which inquired 20,000 urban households with bank accounts, 5,000 businesses and 3,000 banks, provide a comprehensive snapshot of the business view about China.

The survey of businesses suggests that confidence in current and future economic conditions has improved, for the first time in a year says Capital Economics.

Businesses also report that market demand is still weakening, adds Capital Economics. Orders from both home and abroad have continued to slow this quarter. Domestic demand appears stronger, as it has been over the last five years.

According to Capital Economics, the shift towards policy easing at the end of last year appears to have improved banks’ willingness to lend. However, banks report that loan demand remains very subdued, which may explain the recent lower-than-expected loan figures.

Price expectations of households have fallen back for a second quarter, notes Capital Economics. This is the closest China has to an official measure of inflation expectations.

Official figures suggest that average household income growth accelerated over the last few quarters, but this does not seem to have translated into significantly greater satisfaction with current income levels either, points out Capital Economics.

Household spending also remains low reports Capital Economics. Given the chance, most would still prefer to save any extra money.

Capital Economics mentions that households are still sitting on the sidelines of the property market. The share of people claiming they intend to buy a property in the next three months has stopped falling but it remains low.