Xinhua Finance/MNI China Business Survey: Results Climb

Xinhua Finance/MNI China Business Survey: Results Climb

January 26, 2007

    SHANGHAI, China, Jan. 26 /Xinhua-PRNewswore/ -- Xinhua
Finance (TSE Mothers: 9399) and Market News International
(MNI), a part of the news service line of Xinhua Finance,
today announced the January Xinhua Finance/MNI China
business sentiment survey.  The results of the survey
suggest Chinese companies have started the new year in
strong shape financially and see current business
conditions as ripe for further growth.

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

    Although production growth slowed in what is
traditionally a slack time of the year for Chinese
companies, survey respondents reported conditions in
January that led to the highest ever results in a number of
indexes of the two-year-old survey.

    The survey was conducted January 10-23 with 140 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 .

    The indexes for overall business conditions, financial
conditions and back orders all hit their highest levels
ever, with other key indexes remaining at close to record
levels.

    "The surge in corporate confidence is
remarkable," said Logan Wright, Beijing analyst for
Stone and McCarthy Research Associates, a sister company to
Market News.  "It appears that companies have shaken
off the effects of last year's macroeconomic controls, as
future expectations of overall conditions and new orders
are even higher than current levels." 

    The index showing output prices suggested companies are
continuing to raise prices at a relatively fast rate while
the index for input prices, which spiked in December,
declined markedly.

    Indexes reflecting expectations for future conditions
suggest companies see the good times continuing for at
least the near future.

    The index for overall current business conditions rose
to 80.71 in January from 75.21 in December, topping the 80
mark for the first time.  The index for current financial
positions rose to 77.70 in January from 73.31 in December,
which itself had been the highest index result.

    The index for order backlogs rose to 57.03 from 56.45
in December, which again had been the highest result up
until that point.  The growth of new orders remained high,
with the January index showing the current state of new
orders at 74.62, up from 74.04 in December and the highest
result since the April survey last year.

    While the index showing productive capacity grew
slightly, to 70.44 in January from 68.75 in December, the
index showing actual production declined.  The index
showing current production fell slightly to 72.46 from
73.85 in December, remaining above the levels experienced
after the government imposed controls to slow down
overheating parts of the economy early last year.

    The indexes showing companies' expectations for
conditions in three months time suggest most see growth
remaining high.

    The index for future overall conditions hit its second
highest level, rising to 81.43 in January from 78.10 in
December.  The only time the index has been higher was in
the first quarter of last year, before the government
measures to slow the economy were introduced.

    The index for future new orders was also the highest
since the first quarter last year, at 76.52 from 73.08 in
December while the index for future financial positions,
while still high at 75.90, declined from 78.39 in
December.

    Companies expect their backlog of orders to continue
rising, with the index for future expectations on that
question rising to 56.25, up from 54.30 in December and the
highest ever result.
    
    The index showing expectations for production in three
months rose to 75.00 from 71.56 in December, continuing to
show steady gains from the sharp drop in the middle of last
year on the government moves.
    
    "This degree of confidence in a season where
activity is typically slower indicates that companies
retain strong incentives to initiate new investment
projects and expand both production and new capacity,"
said Wright.  "While the central government wants to
maintain a stable rate of investment growth, high corporate
confidence and new expansions in production capacity may
create new concerns among regulators about overcapacity. 
At present, however, companies see rising orders and
improving financial positions." 
    
    Sentiment began to turn around in October, following
six months of government tightening measures aimed at
reining in credit and investment levels.
    
    The credit availability index fell to 60.15 after
hitting a record 64.08 in December.  But the index
reflecting interest rates companies are now paying also
fell, to 54.89 in January from 61.32 in December.

    The record results of the survey are even more
impressive when seasonality is factored in (the results are
not seasonally adjusted).  While the fourth quarter tends to
be the busiest in the calendar year -- particularly for
Chinese exporters working to meet the Christmas rush -- the
Chinese New Year, which comes in January or February,
invariably guarantees that the first three months of the
year are the slowest.

    "The industry doesn't perform so well at this time
of year," noted one respondent manufacturer.  Other
companies that use basic materials such as coal and steel
reported that government efforts to control price rises in
those sectors was having a result.  "Thanks to the
government regulating and controlling the small- and
medium-sized coal mine, demand and supply tend to be
balanced in the coal market," said one respondent.

    A few companies reported increasing production to
offset falling prices, a comment seen often in past
surveys.  But for the first time, a number of respondents
also pointed to consolidation in their industries as having
had a positive effect.  "After a series of mergers and
acquisitions, the group structure is optimized and it is
more competitive," said one manufacturer.

    And for the first time, a respondent attributed higher
demand for his company's retail  products to the runup to
the 2008 Olympic Games to be held in Beijing. 

    Xinhua Finance/MNI China Business Survey Methodology

    The Xinhua Finance/MNI China Business Sentiment Survey
was conducted Janaury 10-23 with 140 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.

    Notes to Editors:

    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]
     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
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     Email: [e-mail]

    Europe
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     Tel:   [phone]
     Email: [e-mail]


SOURCE  Xinhua Finance; Market News International