US credit crisis continues to bruise Chinese confidence

By Wang Yanlin  |   2008-7-31  |     NEWSPAPER EDITION

CHINESE consumer confidence dropped 3.1 points in July due to negative factors such as the falling stock market and concerns on deepening subprime mortgage crisis.

The China Consumer Confidence Index, compiled by the Xinhua Finance Ltd and eziData, settled at 92 points this month, down from 95.1 points in June, the two companies said yesterday.

The stock market, which was in the doldrums and kept failing to return to 3,000 points, was said to be a major cause for the index slump.

Meanwhile, the aftermath of the United States subprime mortgage crunch made investors worried about its further influence, especially when Fannie Mae's and Freddie Mac's credit crisis came under the spotlight earlier this month.

The July consumer sentiment on current conditions was 90.9, 3.7 points down from June. It came out of the continuous failure of the expected stock market rebound in recent couple of months, which caused more losses for investors, the report said.

The July consumer sentiment on future expectations was 92.6, down 2.6 points from a month earlier. The decline was mainly due to consumers' concerns on possible deepening of the subprime mortgage crisis, which was expected to have negative impacts on China's future economy.

China's gross domestic product growth has eased to 10.1 percent in the second quarter from 10.6 percent in the first three months this year.

The country's Consumer Price Index, the main gauge of inflation, slowed to 7.1 percent in June from 7.7 percent in May and 8.5 percent in April.

The result showed that Chinese consumers' sentiment on current general prices improved and rose 0.7 point to 72.2 in July.

Although authorities continued to stress that the fight against inflation should still be the top priority, the central bank did not mention "tight" in its policy stance in the latest meeting last weekend in Beijing.