China’s business sentiment rises in November, business conditions likely to hold up

China’s business sentiment rose in November. Confidence amongst executives at China’s biggest firms was up slightly in the month after dropping in October, as increases in new orders and output triggered optimism, while the recent depreciation in yuan also supported the sentiment.

The MNI China Business Sentiment Indicator, which measures the country’s current business confidence, rose 1.7 percent to 53.1 in November from 52.2 in October. Companies continued to be comparatively more optimistic regarding the future, with the Future Expectations Indicator staying above the current measure. This hints that business conditions in China are expected to continue to hold up.

Key activity indicators also indicated towards a considerable rebound in November. Both new orders and production rose strongly in November. Production rose to a 13-month high of 58. Firms anticipated increased activity to continue in the next three months, with the Future Expectations Indicators for both measures regaining ground lost from the previous month, said MNI.

The Employment Indicator also recorded an increase to the highest since April 2016. In the meantime, the Financial Position Indicator rose strongly to 57.6 in November from 52 in October. This was the fourth straight monthly rise and the highest reading since June 2014.

The recent weakness in Chinese yuan has been taken more positively by companies with a rising number noting that the current was a help to their business operations. The impact of the yuan exchange rate indicator was up for the second straight month to 54.1 in November from October’s 50.8. On the contrary, companies recorded a slight tightening in credit conditions from October.

The Availability of Credit Indicator fell 3 percent to 51.2 in November, whereas the cost of credit, gauged by the Interest Rates Paid Indicator, was up slightly to 46.1.  It stayed below the threshold of 50 level, which signifies that most companies continued to register that the cost of credit had been low, stated MNI.

MNI Indicators Senior Economist Andy W stated that the latest MNU China Business Sentiment Survey results give further evidence that China’s economy continues to be on a stabilizing path.

“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”, added Andy Wu.