China small business confidence still falling despite reopening

ECONOMIC activity continued to fall in December for China’s small firms, with the business outlook weakening further as Covid cases surge amid reopening, according to Standard Chartered.

A gauge of business conditions at small and medium enterprises was in contractionary territory for a third straight month in December, the firm said in a report on Tuesday (Dec 20), although it improved slightly from November. The ‘performance’ sub-index rose 0.1 point to 48, while the ‘expectations’ sub-index declined 0.4 point to 49.3 on “a weaker outlook for sales and labour usage”, according to the report.

The manufacturing sector saw some improvement, with a rise in new orders, sales and production from November “likely reflecting the positive impact of the relaxation of Covid control”, the firm’s economists Hunter Chan and Ding Shuang wrote in the report. However “services SMEs continued to face headwinds from weak consumer sentiment amid rising Covid cases”, they wrote, with the performance and the expectations sub-indexes dipping further below 50.

A breakdown of the services sector showed only accommodation and catering firms saw a sharp rebound in performance from a month ago, while other activities such as real estate, transport and retail sales continued to contract.

The index is based on a monthly survey conducted by Standard Chartered of more than 500 smaller companies across China, which assesses current performance, business outlook and credit condition at those firms. The survey this month was mostly conducted in mid-December, the firm said. The 50-mark separates expansion from contraction in conditions. BLOOMBERG