Xinhua Finance/MNI China Business Survey: Sentiment Bullish

Xinhua Finance/MNI China Business Survey: Sentiment Bullish

December 29, 2006

    SHANGHAI, China, Dec. 29 /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 December Xinhua Finance/MNI China
business sentiment survey.  The results of the survey
suggest operating conditions for Chinese companies are good
and getting better, with firms able to raise their sales
prices even in the face of climbing raw materials costs.

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

    That has resulted in companies reporting that they are
in their best financial shape in the survey's near-two year
history, while indices covering factors such as new orders
continued to show solid improvements after dipping earlier
in the year on the back of government efforts to cool
lending and investment activity.

    Sentiment is looking even better in the future, with
the index measuring where respondents see overall business
conditions in three months hitting its highest level since
the start of 2006.

    The survey was conducted December 11-26 with 121 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 changes in companies' expectations are fairly
remarkable," said Logan Wright, a Beijing-based analyst
with Stone & McCarthy, a sister company of Market News
International.
 
    "In previous months, companies expected lower
sentiment levels in 2007; however, the December survey data
indicate that companies appear to have shaken off those
fears, and expect constant or even improving conditions in
the new year."

    The index measuring current overall conditions stood at
75.21 in December, down only marginally on the previous
month's 75.67 which remains the second highest reading
since the survey began in the first quarter of 2005.

    Sentiment began to turn around in October, following
six months of government tightening measures aimed at
reining in credit and investment levels.  Beijing has so
far avoided taking tougher action, choosing instead to
target the liquidity sitting on bank balance sheets.  But
concerns that borrowing costs are headed higher have not
dissipated.

    The markets were roiled earlier in December by rumors
that the People's Bank of China had been cleared by the
central government to raise benchmark lending rates for
what would have been the third time this year.  That hasn't
affected the ability of companies to borrow.  The credit
availability index hit 64.08 in December, the highest in
the survey's history.

    The index measuring the interest rates that companies
are paying rose to 61.32 in December from 57.14 in
November, while interest rate expectations three months out
jumped to 65.09, its highest level since the first quarter
of 2005.

    That said, concerns about higher rates aren't affecting
the flow of business, with the improvement in conditions
reflected in indices such as that measuring the prices that
companies are receiving for their goods, which showed steady
improvement for the fourth survey in a row.  The index hit
61.61 in December, the highest reading since the first
quarter of 2005, while the index measuring future
expectations for prices received was also positive, rising
to 58.48 from November's 55.14.

    The new orders index rose to 74.04, returning to levels
last seen in the second quarter.

    Improved price traction has come even as companies
report rising raw materials prices.

    Although falling prices for raw materials such as oil
saw the index measuring input prices falling for four
surveys in a row, it bounced back in December, leaping to
67.11 from November's 57.19.

    "Lead prices are at a high level, and we don't see
them falling in the short-term. This means high costs,"
said one respondent.

    But rising costs and interest rate concerns don't
appear to be enough to have impacted corporate balance
sheets, with the index measuring the financial position of
companies hitting 73.31, the highest reading in the
survey's history, and up from 71.72 in October.  Worries
about higher interest payments also haven't affected how
companies see the future, with the index measuring
financial positions three months out hitting 78.39, its
highest reading since the first quarter of this year.

    "Despite rising input prices, Chinese companies
are still confident that they will maintain pricing power
in the marketplace," said SMRA's Wright.  

    "This is likely a factor behind the high level of
the financial position indicator in December and the
expectations of stronger overall business conditions moving
forward."

    Seasonality also played its part in the survey results.
 While the fourth quarter tends to be the busiest year in
the calendar -- 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. 
"Conditions are affected by the seasons.  The first
quarter is usually our low season," said one
respondent.

    The index measuring inventories of finished goods rose
back to 50.00 this month, up nearly ten points over
November's reading, suggesting that warehouses are filling
up again after the Christmas season drawdown.  The index
measuring production rose to 73.85 in December, the highest
reading since the first quarter of this year.

    Xinhua Finance/MNI China Business Survey Methodology
    The Xinhua Finance/MNI China Business Sentiment Survey
was conducted December 11-26 with 121 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: 

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

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

     Mr. James Hawrylak
     Taylor Rafferty (Media/IR Contact)
     Japan 
     Tel:   [phone]
     Email: [e-mail]

     Ms. Ishviene Arora
     Taylor Rafferty (Media/IR Contact)
     United States
     Tel:   [phone]
     Email: [e-mail]

     Mr. John Dudzinsky
     Taylor Rafferty (Media/IR Contact)
     Europe
     Tel:   [phone]
     Email: [e-mail]


SOURCE  Xinhua Finance Limited