Business confidence remains 'in high range'

By Wang Yanlin  |   2008-7-8  |     NEWSPAPER EDITION

CHINA'S business climate index rose to 137.4 in the second quarter, a climb of 1.2 points from the first three months, the National Bureau of Statistics said yesterday.

But the index was much lower than the second quarter a year earlier when it stood at 146, after which it started to fall when the government switched to tighter credit policies to fight inflation.

Compared with the period from January to March this year, the index of manufacturing industries grew 2.4 points in the second quarter, with the property sector little changed and other industries posting a moderate decline, said the bureau.

The index, ranging from zero to 200, represents positive or improving business conditions when it is above 100.

"The business confidence remains in a relatively high range because the overall economic environment is still good," said Li Maoyu, an analyst with Changjiang Securities Co. "The manufacturing sector is not hurt too much by the rising costs of raw materials, which is a good sign of future development."

In May, China's Producer Price Index, the main gauge of factory-gate inflation, rose to a more than three-year high of 8.2 percent. The increasing global crude oil prices - above US$145 a barrel - and rising costs of basic commodities contributed to the higher PPI in China's mainland.

Meanwhile, the government has still maintained a tight monetary policy in the first half by raising banks' reserve requirement ratio to soak up liquidity and curb inflation.

At the weekend, Premier Wen Jiabao said China's price increases must be controlled within a range that the country's economic and social development can accept.

Xia Bin, a senior researcher at the Development Research Center, a think tank under the State Council, said China should not place too much emphasis on fighting inflation at the expense of the country's economic growth. China's economy has eased to 10.6 percent in the first quarter, down from 11.9 percent last year.