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China’s SMEs scale back in performance
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ACTIVITIES of China's small and medium-sized enterprises fell in June for the third consecutive months to the lowest in more than a year under weakened demand and tightened liquidity, Standard Chartered Bank said in a report released yesterday.
The Small and Medium Enterprise Confidence Index fell to 54.7 in June, the lowest in 16 months, from 56.9 in May, the report said.
Sales and production, raw material, inventory and investment indices all pointed down, weighing on profitability and employment.
The momentum index plunged to 6.5 from May's 14 on a decline in new orders and higher finished goods inventory, indicating a worsening outlook which may in turn hinder production and real activity near-term, the report said.
Meanwhile, a sub index measuring banks' attitude towards lending to SMEs fell below 50 for the first time on record, reflecting tightened credit conditions.
Although the central bank will likely provide sufficient liquidity to avoid a liquidity crunch, banks may still prefer lending to bigger rather than smaller companies amid tighter liquidity conditions.
Funding costs are expected to stay high in the second half, it said.
On the other hand, major economic activity indicators in China, including industrial output, retail sales, and trade showed cooler growth in the second quarter but the May data beat expectations to reveal sound momentum in the economy
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