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Business confidence climbs

CHINESE entrepreneur confidence rose in the second quarter while business conditions also improved due to proactive fiscal and monetary policies, the National Bureau of Statistics said yesterday.

The entrepreneur confidence index settled at 110.2 in the second quarter, indicating a "positive attitude," and was up 9.1 points from the January-March period.

The business climate index increased 10.3 points from the first three months to 115.9 in the second quarter, an indication of "expansion."

An index reading above 100 is positive while it's considered negative when it drops below 100.

"Both figures reflect upward momentum in the Chinese economy. The rising confidence is crucial to sustain the recovery while the still loose monetary policy can create a supportive environment for businesses," said Li Maoyu, an analyst at Changjiang Securities Co.

New yuan-backed loans rocketed to 1.53 trillion yuan (US$224 billion) last month, more than doubling the 591.8 billion yuan in May and pushing the total amount in the first half to a record 7.37 trillion yuan.

China adopted a proactive fiscal and monetary policy stance in November and launched a 4-trillion-yuan package to stimulate the economy and counter the global financial crisis.

Sherman Chan, a Moody's analyst, said optimists clearly outnumbered pessimists.

"However, the scores are still considerably below the readings recorded one year ago, which means that overall business confidence is yet to return to pre-crisis levels and the government is likely to maintain a loose policy stance in coming months," Chan said.

In the same period of last year, both indexes were at levels above 140, which indicated "prosperous."

Among the 19,500 executives interviewed, managers in the manufacturing, property and catering sectors were most optimistic. The confidence index among property entrepreneurs improved 26.7 points to 116.7 while in the construction industry it settled at 126.2.

Executives in state-owned companies and foreign-invested firms were both optimistic, with their confidence indexes at 109.8 and 112.9 points respectively.

Better business conditions in the second quarter laid the foundation for the growing confidence. The climate index advanced in the manufacturing, construction and property industries - in line with the trend reflected by the confidence index.

The climate index for the property sector gained 18.7 points in the second quarter after five consecutive quarterly contractions. It returned to expansionary territory in the second quarter after falling into negative ground in the first three months.

The climate index of the industrial sector also returned to positive turf at 112, up 12.2 points from the previous quarter.

"The increase in the industrial component is the most encouraging, as manufacturing is a key sector for China. It is a solid sign that China's economy is recovering well," said Chan.

Industrial output posted better-than-expected growth of 8.9 percent in May, compared to 7.3 percent in April and 8.3 percent in March.


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