Business confidence among some of China’s largest companies is at its highest level since October 2011, with optimism boosted in December by the newly announced reform agenda. The MNI China Business Indicator rose to 58.4 in December from 53.3 in November, fuelled by a large jump in the number of firms that said their current business conditions were better than a month earlier.
The production indicator rose firmly in December to the highest for a year, with average growth over the fourth quarter hitting a two-year high. Growth in new orders accelerated in December, after a slight dip in November, and expectations for the future rose to the highest for nearly a year and a half.
Many firms believe the reform agenda announced following the Third Plenum – a major policy meeting for China's leaders – will bring concrete results in terms of increased access to credit following further liberalisation of interest rates. Expectations for credit availability over the next three months leapt to the highest since February 2010 and above the breakeven 50 level for the first time since May.
Commenting on the data, Philip Uglow, chief economist at MNI Indicators, stated: “Businesses ended the year on a high note and appear hopeful that the reform agenda will enhance their growth potential. While much attention has focused on the central bank’s efforts to cut back on credit, companies in our panel expect that liberalisation of interest rates will help to boost the availability of credit.
"Recovery in the global economy in 2014 should help to underpin growth as the authorities gradually roll out their reform plans," he added.
MNI China Business Sentiment is a monthly poll of Chinese business executives at companies listed on either the Shanghai or Shenzhen stock exchanges. Companies are a mix of manufacturing and service sector firms.