Business sentiment in China took a big hit in June. I don’t know too much about the Chinese version of this metric but I’m pretty sure it’s a coincident indicator, in other words neither leading or lagging. What may be more useful is why business sentiment grew more sober in June. Two reasons are given in the article: Government tightening and the eurozone crisis, according to the Shanghai Daily…
Overall operating conditions for Chinese companies were rated 64.94 this month following June’s 63.51 — a sharp fall from 78.46 in May, said the China Business Sentiment Survey by Market News International, a subsidiary of the Deutsche Boerse Group, a real-time news agency.
The index was hit in June by government tightening measures and widespread concerns that the debt crisis in the eurozone’s peripheral members could get worse and engulf the global economic recovery.
The survey said concerns on the impact of the eurozone crisis have abated somewhat and Chinese companies are now seeing a seasonal uptick in business ahead of the Christmas season in western economies.
But the results also indicated Chinese companies remain cautious about the outlook for demand, and worried about rising raw material and labor costs.
Sentiment should improve with the approach of the holiday season. But, listen, China is by no means grinding to a halt. But it does seem that Chinese companies are almost as worried as Western companies. And that’s odd. China’s economy is still humming along at double-digit growth. I suppose everything is relative. For China, that’s a bit on the slow side.
