---Report of the Enterprises Business Climate Surveyfor the Fourth Quarter of 2007
In the fourthquarter of 2007, the Enterprises Business Climate Survey conducted by the People’sBank of China successfully collected 5497 responses, result of which shows thefollowing:
1. Macroeconomicindex reached a new high, while the entrepreneurs’ confidence index continuedto fall
The survey showsthat macroeconomic index has been climbing persistently, with the fourthquarter witnessing a historic high of 18.4 percent, an accumulative yearly riseof 15.1 percentage points. The main reason is that entrepreneurs thought theeconomy had a sign of “overheating”, and the proportion of entrepreneurs consideringthe macro-economy as “relatively overheated” increased to 21.6 percent in thefourth quarter from 21.1 percent in the third quarter, only second to the historichigh of 22 percent recorded in third quarter of 1993 when there was evidence ofeconomic overheating. With entrepreneurs’ worries about economic overheating intensifying,the entrepreneurs’ confidence index further declined by 0.1 percentage pointsto 76.9 percent in this quarter after a major decline of 6.4 percentage pointsin the previous quarter.
2. Inflationarypressure continued to intensify, and monopoly industries had an obvious sign ofprice transferring, but industries with perfect competition showed restraint inprice transferring by increasing sales prices
The survey showsthat upward price pressure of enterprises continued to intensify. 39.8 percentof entrepreneurs predicted that prices of production materials would rise, upby 1.9 and 13.9 percentage points from the previous quarter and the same periodof last year respectively, reaching a new high since 1997. Among which, 42.9percent of entrepreneurs predicted that the raw materials purchasing priceswould rise, while 19.0 percent of entrepreneurs believed that sales priceswould rise. Although the proportion of entrepreneurs predicting an increase of rawmaterials purchasing prices and sales prices continued to rise quarter byquarter, there was increasing gap between them, indicating that with thecontinuous rise of raw materials purchasing prices, most entrepreneurs remainedcautious in transferring upward cost pressure by increasing the productionsales prices. Broken-down by industries, there was a relative lower ratio of entrepreneursin industries with perfect competition predicting that the sales prices wouldrise, while higher ratio of entrepreneurs predicting sales prices would go upmainly came from the industries with varying monopolies, including petroleumprocessing and coking, petroleum and natural gas extraction, and ferrous metalsmelting and processing.
3. Marketdemand index fell from the previous high level; domestic orders continued tohold tight while export orders have been falling for two consecutive quarters
The survey showedthat market demand index declined to 24.2 percent in the fourth quarter afterit reached a historic high of 24.6 percent in the second quarter, an accumulativedrop of 0.4 percentage points. In terms of market demand expectation, entrepreneurswere less optimistic as in the previous two quarters. The expectation index was22.8 percent, down by 1.4 percentage points from previous estimation. Amongwhich, domestic order index reached a historic high of 13 percent, up by 1.4percentage points and 4.4 percentage points from the previous quarter and thesame period of last year. As foreign market was influenced by many complexfactors, the export order further fell 0.8 percentage points in the fourthquarter to 6.4 percent after falling 2.5 percentage points in the thirdquarter.
4. The effectsof macro-control policies started to unwind, and the enterprises’ fixed assetinvestment slowed down from high level with high energy-consumption industries fallingthe most
Since 2004, thefixed asset investment of enterprises index under monitoring saw a trend ofgradual increase, and increased from 4.7 percent to 9.1 percent, anaccumulative increase of 4.4 percentage points. Generally speaking, the indexreached its highest level in the fourth quarter every year. However, this rulewas broken this year, with the fixed asset investment index in the fourthquarter standing at 9.1 percent, down by 0.5 percentage points from theprevious quarter. Entrepreneur’s investment expectation for the first quarterof 2008 also saw a decline, with fixed asset investment expectation index standing3.2 percent, down by 5.9 percentage points compared with this quarter. Brokenby industries, more than half of the industries saw a decline in theirindustrial fixed asset investment index. Among which, high energy-consumptionindustries and pollutant industries such as oil and natural gas extraction,ferrous metal smelting and processing, non-metal and metal mining industrieswitnessed the largest decline, indicating the nation’s macro-control policieshave already produced effect.
5. The overallenterprises business performance was good, but nearly 30 percent ofentrepreneurs considered banks’ lending policy “relatively tight”, and thepayment capacity of enterprises declined from the high level.
The survey showedthat nearly 40 percent of entrepreneurs (39.5 percent) regarded the overallbusiness performance as “fairly good”, the highest point since the launch ofthe survey, up by 0.3 percentage points and 2.4 percentage points from theprevious quarter and the same period of last year respectively. Theprofitability capacity of enterprises were fairly robust, and 28.8 percent ofentrepreneurs said their enterprises’ profits had risen, down by 0.3 percentagepoints from the previous quarter, but up by 0.8 percentage points from the sameperiod of last year, still among the historic highs.
With continuousincrease in the banks’ reserve requirement ratio, entrepreneurs thought thebanks’ lending policies were getting tighter gradually. In this quarter, 25.1percent of entrepreneurs thought lending policies “relatively tight”, up 3.5percentage points from the previous quarter, the highest level for the last twoyears. In the meantime, 31.0 percent of entrepreneurs thought their enterprises’payment capacity “relatively strong”, down by 1.4 percentage points from theprevious quarter.
6. Power supplywas sufficient, but entrepreneurs’ satisfaction with supplies of energy and rawmaterials has been falling for two consecutive quarters
With theimprovement of electricity production capacity, the issue of insufficient powersupply had been mitigated greatly. The survey shows that in the fourth quarter,32.8 percent of entrepreneurs considered power supply “sufficient”, down by 0.6percentage points and 0.7 percentage points from the previous quarter and thesame period of last year respectively, while 22.4 percent of entrepreneursconsidered supply of raw materials “sufficient”, down by 1.3 and 0.9 percentagepoints. Besides, entrepreneurs were pessimistic about supplies of power and rawmaterials of next year, and the expectation indexes for both sectors fell by2.6 percentage points and 2.8 percentage points from the previous quarter andthe same period of last year.
