CKGSB BCI: Financing Situation in China Far from Ideal

With the unveiling of the “Lianghui” parliamentary sessions, China’s financing situation has again become a hot topic. During the two sessions, Chinese leaders have showed their determination to reduce resistance for Chinese firms, while many have expressed optimism about the financing situation in the near future. Nevertheless, companies in China still face many problems.

A recent article by Dow Jones Newswires focusing on the financing conditions of China comments that the situation is far from ideal. The article quotes the CKGSB BCI, or Business Conditions Index, which registered 55.8 in February, up from January’s level of 51.2. It notes that respondents were relatively optimistic about the next six months, with sub-indices on profit, inventory, corporate investment and labor demand improving, while the financing index rose slightly, but remained below the 50 break-even level, signaling contraction.

The Dow Jones article also mentioned that the CKGSB BCI indices are higher than government and industry indices because the sample firms – those run by current or former CKGSB students – are in a relatively strong competitive position in their respective industries, so the conditions for most companies in China are even more difficult. CKGSB Professor of Economics Li Wei, who leads the monthly survey, was quoted as follows:

“The financing situation for Chinese companies is far from ideal. Companies face both financing difficulties and high costs.”

Launched in June 2011, the CKGSB BCI index is a monthly survey conducted by the CKGSB Case Center and the Center for Economic Research which gauges the business sentiment of executives about the macro-economic environment in China. Here are the key points of this month’s index:

• The main CKGSB BCI rose in February from 51.2 in January to 55.8, halting a steady downwards trend from a high of 61.3 in May 2015.
• All four main sub-indices also rose in February.
• The sales index rose considerably from 65.3 in January to 75.0 in February, continuing to climb after hitting 56.6 in September 2015.
• The profit index rose, edging up again from 55.6 in January to 57.0 in February, after being below 50 for three straight months last summer.
• The financing index rose slightly from 43.7 in January to 45.6 in February, but remained below the confidence threshold of 50, where it has been for almost all of the past 30-odd months, showing the longstanding financing difficulties for Chinese SMEs.
• The inventory index rose significantly in February, rising to 46.6 from 37.0 in February, but has remained below the confidence threshold of 50 for most of the past three years, showing clear signs of instability and a long-term outlook that is “far from positive”.

To read the CKGSB BCI report for February in full, please click here.