Business sentiment drops sharply in October

By Wang Yanlin  |   2008-10-31  |     ONLINE EDITION

CHINESE business sentiment fell sharply in October because of a dire economic outlook at home and overseas, a report by Xinhua Finance Ltd said today.

The sentiment index for current business conditions in October fell to 49.06 points, the first time the index dropped below 50 since it began in January 2005.

The index settled at 58.24 in September and was close to 80 early last year, said the financial information provider.

An index figure above 50 indicates business activity is growing or improving while a figure below 50 means a decline.

"The worsening economy at home and abroad outweighed any positive news from a decline in inflation," said the report.

China's economy, although largely unscathed so far from the global financial fiasco, slowed to 9 percent in the third quarter from 10.1 percent in the second quarter and 10.6 percent in the first three months.

The Consumer Price Index, the country's main gauge of inflation, dropped to 4.6 percent in September from a record of 8.7 percent made in February.

"People's sentiment can be easily affected by the gloomy outlook, especially when the domestic stock and property markets are in a period of uncertainty," said Li Maoyu, an analyst with Changjiang Securities Co.

"However, the real conditions are not so bad considering the economic fundamentals here are mainly unchanged."

The National Bureau of Statistics said yesterday that China's macroeconomic climate index in the first three quarters stayed at 113.2 points, remaining "steady" despite a retreat from 114.9 points in the first half.

The index ranges from zero to 200. A figure above 100 represents positive or improving conditions, while a number below 100 signals negative or deteriorating conditions.