Xinhua Finance/MNI China Business Survey: Conditions Improve

Xinhua Finance/MNI China Business Survey: Conditions Improve

November 24, 2006

    SHANGHAI, China, Nov. 24 /Xinhua-PRNewswire/ -- Xinhua
Finance (TSE Mothers: 9399) and Market News International
(MNI), a part of the news service line of Xinhua Finance,
today announced the November Xinhua Finance/MNI China
business sentiment survey. The results of the survey
suggest Chinese companies have weathered government-imposed
investment and credit controls and are now benefiting from
slowing input price rises and an improved bottom line.

    (Logo:
http://www.xprn.com.cn:9080/xprn/sa/200611140926.gif )

    The survey was carried out November 6-21 with 150
listed companies responding. A result greater than 50
implies growth or improving conditions (See accompanying
story for more on the survey methodology). The full survey
results can be found at
http://www.xinhuafinance.com/en/main/chinabizsurvey.html .

    While the indexes for current conditions have mostly
improved and are well off their lows from the middle of the
year, some of the key indexes showing the outlook for
conditions in three months fell, most likely due to a
combination of seasonal factors and expectations of slower
growth next year. 

    "While the survey indicates conditions are
generally quite positive, it's clear from the results that
there are expectations of a general slowdown going into
next year," said Logan Wright, Beijing-based analyst
with Stone & McCarthy Research Associates, a sister
company of Market News International. The index for current
overall conditions hit 75.67 in November, up from 68.44 in
October and the second highest result for the index after
the first quarter of 2005, which was the first survey in
the series. "Business sentiment regarding current
economic conditions has recovered considerably since the
summer, when the government's macroeconomic controls began
to take effect," noted Wright. 

    With raw materials prices either falling or moderating
because of government measures amid a general global price
decline for things like oil and steel, the index for input
prices fell to 57.19 from 64.23 in October, the lowest ever
result. 

    At the same time, the index for prices received
suggests more companies were able to increase their prices.
That index rose to 57.43 from 55.80 in November. 

    According to the survey result, the index for
companies' current financial position hit the highest mark
ever, at 71.72 in November from 67.63 in October.

    "With coal prices remaining stable, we were able
to increase profits, said one power producer. A maker of
metal products had a similar story, saying that the prices
of his products were increasing while prices of his main
raw material was falling "which contributed to an
increase in the company's gross profit."Companies also
continued drawing down inventories, with that index falling
to the lowest-ever level at 40.88, down from 42.80 in
October. The index for productive capacity increased to
71.38 in November, the first increase since the first
quarter of the year and up from 62.59 in October. The index
for production also rose, to 70.63 from 68.75 last month.On
one of the few negative notes for current conditions, the
survey suggested that companies were seeing the growth of
order backlogs slowing, with the index falling to 51.88 in
November from 55.08 in October. 

    There were more negatives seen in the indexes for
expectations of conditions in three months. Some of the
decreases in index levels matched results seen in the
expectation indexes for the fourth quarter last year,
suggesting that the results may be partially explained by a
seasonal slowdown in the first part of the year. 

    But at least some of the decline in sentiment must be
due to expectations that Chinese growth and business
activity will slow next year. 

    The index for new orders in three months fell to 69.72,
its lowest ever. The index for productive capacity growth
fell to 65.52, close to the lowest-ever mark for that
index.

    "The results suggest that companies are preparing
for a slowdown next year from the very fast growth seen
this year," said Wright.

    Xinhua Finance/MNI China Business Survey Methodology

    The Xinhua Finance/MNI China Business Sentiment Survey
was conducted November 6-21 with 150 listed companies
taking part.

    Survey questions were modeled on Japan's Tankan survey
and the U.S. Institute for Supply Management's Report on
Business.

    Results were compiled for both current conditions
compared with a month ago and for expectations of
conditions one month ahead.

    Indexes were compiled using the Institute for Supply
Management's example: adding half of the percentage saying
conditions were unchanged to the percentage of those saying
conditions had improved generated the index. Therefore, a
result higher than 50 indicates a net positive response.

    Companies agreed to participate in the survey, and to
provide comments about business conditions, under the
assurance that individual survey responses would not be
divulged except as part of the overall results.

    Companies surveyed were all listed on domestic stock
markets or in Hong Kong, although some also have foreign
listings. The companies chosen were a mix of manufacturers
and non-manufacturers with about 75% of the companies
responding to the survey in manufacturing.

    About Xinhua Finance Limited 

    Xinhua Finance Limited is China's unchallenged leader
in financial information and media,  and is listed on the
Mothers board of the Tokyo Stock Exchange (symbol: 9399)
(OTC ADRs: XHFNY). Bridging China's financial markets and
the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through four focused and
complementary service lines: Indices, Ratings, Financial
News and Investor Relations.  Founded in November 1999, the
Company is headquartered in Shanghai with 20 news bureaus
and offices in 19 locations across Asia, Australia, North
America and Europe.  

    For more information, please visit
http://www.xinhuafinance.com . 

    About Market News International

    Market News International (MNI), a Xinhua Finance
company ( http://www.xinhuafinance.com ), is a financial
news and information company dedicated to the global fixed
income and foreign exchange markets.  MNI joined the Xinhua
Finance family in March 2004, bringing its niche expertise
and extensive distribution network.  Headquartered in New
York, MNI has news bureaus and offices throughout the US,
Europe and Asia.

    With more than twenty years of history, MNI is a fully
accredited news agency providing focused, timely, relevant
and critical intelligence for market professionals.  Its
press credentials are accepted by all operations of the
U.S. Government, including the White House, the Federal
Reserve, both houses of Congress, all major agencies and
cabinet departments, all similar government operations in
the G-7 countries, as well as by supranational
organizations such as the World Bank and the International
Monetary Fund.

    For more Information, please contact: 

    Xinhua Finance

    Hong Kong/Shanghai
     Ms. Joy Tsang
     Tel:   [phone]
            [phone]
            [phone]
     Email: [e-mail]

    Japan 
     Mr. Sun Jiong
     Tel:   [phone]
     Email: [e-mail]

    Taylor Rafferty (Media/IR Contact)

    Japan 
     Mr. James Hawrylak
     Tel:   [phone]
     Email: [e-mail]

    United States
     Ms. Ishviene Arora
     Tel:   [phone] 
     Email: [e-mail]

    Europe
     Mr. John Dudzinsky
     Tel:   [phone]
     Email: [e-mail]

SOURCE  Xinhua Finance Limited