Low credit costs boost China business sentiment: report

BEIJING -- Chinese businesses are showing growing optimism thanks to a favorable policy environment, a leading indicator showed.

The MNI China Business Sentiment jumped 8.4 percent month on month in October to 55.6, from 51.3 in September.

"This is a very positive signal," said Li Jin, vice president of China Enterprise Reform and Development Society, a think tank. The data indicated that Chinese companies are optimistic about the overall economy as well as their own business operations in the future, he said.

Market News International (MNI), an international market news website, has been releasing its Business Sentiment Indicator for the Chinese economy since 2007. The indicator is based on monthly polls of around 200 large companies listed on the Shanghai and Shenzhen stock exchanges and released before publication of official data such as GDP and inflation to analyze economic trends.

The rebound in business sentiment was mainly due to a relatively quiet policy environment and financial markets in October, the MNI report said.

Lower credit costs resulting from monetary easing policies are also key to boosting confidence among companies. According to the report, businesses reported the lowest interest rates ever paid since 2012.

China's central bank has cut benchmark interest rates and the reserve requirement ratio five times this year to shore up the economy.

"Financing costs have been lowered significantly compared to the beginning of this year, which relieved many of our concerns when making investment decisions," said a supervisor for a listed company in southern China who asked not to be named.

The Availability of Credit Indicator also expanded, signalling easier access to funds. A weaker yuan also helped business operations, the report showed.

The MNI China Business Sentiment Indicator showed volatile movement since July that was influenced by headlines on policy announcements and recent stock market fluctuations. Still, the upward momentum is in line with business activities surveyed by MNI.

"The current balance of evidence suggests that Chinese businesses have weathered the worst of the headwinds," said Philip Uglow, chief economist of MNI Indicators.

In addition to favorable monetary policies, the Chinese government has pushed a set of measures to help the growth of domestic enterprises such as reducing fees and taxes and cutting red tape. Officials have also encouraged entrepreneurship and innovation many times in key government meetings, which also helped boost the business sentiment of Chinese firms.