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Economic concerns growing among entrepreneurs, bankers

By Zhang Lu (China Daily)
Updated: 2007-06-21 08:42

Concerns about an overheated economy grew sharply among Chinese entrepreneurs and bankers in the second quarter, according to the People's Bank of China surveys.

In a quarterly survey, 14 percent of 5,635 entrepreneurs expressed concern that the economy, which hit its highest point since the first quarter of 1994, was expanding too quickly.

The entrepreneurs' confidence index fell to 83.4 percent, the lowest level in two years. The index was 87.1 percent in the same period last year and 88.5 percent in the first quarter this year.

The entrepreneurs surveyed said they think the economy will continue to overheat in the third quarter, with the overheating expectation sub-index hitting a record high of 8.6 percent.

In another quarterly survey of 2,850 banking institutions, a growing number of bankers said they believe the economy is fairly hot.

More than 67 percent of respondents said the economy was overheating to some degree while 32 percent thought the economic situation remained normal. The central bank did not provide comparative figures.

Special coverage: Markets Watch Related readings:  Entrepreneur confidence index hits record high  Figures indicate risk of overheated economy  More macro control to avoid overheating  Finance: Overheating is a structural problem

The survey said 57.8 percent of bankers expected the economy to continue overheating in the third quarter.

The bankers were not optimistic about future economic conditions. The bankers' confidence index dropped sharply to 36.7 percent from 60.6 percent in the first three months this year.

This is the second time the index has dropped below the critical level of 50 percent since the beginning of 2004. It dropped to 43.8 percent in the third quarter last year, the survey said.

Forty-three percent of bankers braced for a further tightening of monetary policies in the third quarter.

Chinese entrepreneurs also anticipated tightening measures, such as raising interest rates, in the next three months.

The central bank has increased interest rates twice and raised the banks' reserve requirements four times this year to prevent the economy from overheating.

The moves have gradually taken effect. Among the surveyed entrepreneurs, 25.8 percent said the lending rates were relatively high this quarter.