MNI China Business Sentiment Indicator is up in November

The MNI China Business Sentiment Indicator, a gauge of current business confidence, rose 1.7% to 53.1 in November from 52.2 in October. Firms remained relatively more upbeat about the future, with the Future Expectations Indicator holding above the current measure, signalling that business conditions will likely continue to hold up.

Key activity indicators also pointed to a significant improvement during the month. Both Production and New Orders picked up strongly in November, with the Production Indicator rising to a thirteen-month high of 58.0. Companies expected increased activity to continue over the next three months, with the Future Expectations Indicators for both measures regaining the ground lost in the previous month. Partly reflecting this, there was also an uptick in the Employment Indicator which edged up to the highest since April this year.

The Financial Position Indicator trended up strongly to 57.6 in November from 52.0 in October, the fourth consecutive monthly rise and the highest reading since June 2014. Companies’ financial standing has likely been boosted by a stabilisation in the economic environment and helped in part by the ongoing government reform efforts to address the issue of over-production.

The Chinese yuan’s recent weakness has again been taken more positively by firms with an increasing number noting that the currency was a help rather than a hindrance to their business operations. The Effect of the Yuan Exchange Rate Indicator rose for the second consecutive month to 54.1 in November from 50.8 in October.

In contrast, firms noted a slight tightening in credit conditions compared with last month. The Availability of Credit Indicator eased 3% to 51.2 in November from 52.8 in October. In line with this, the cost of credit, measured by the Interest Rates Paid Indicator, rose marginally to 46.1, although it remained below the breakeven 50 level, meaning that most firms continued to report that the cost of credit had been low.

Andy Wu, Senior Economist of MNI Indicators, commented:

The results of the latest MNI China Business Sentiment Survey provide further evidence that the Chinese economy remains on a stabilising path. Businesses are finding additional support in a depreciating currency environment while new orders and output remain elevated. On the back of this, an increasing number of firms are upbeat about hiring. All in all, our survey suggests Chinese businesses have weathered various macro headwinds reasonably well.

Looking ahead, companies remain optimistic about production, demand and their financial standing, underpinning sentiment towards the business environment.

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