SME's confidence in China economy up in September

Confidence Index rose to 56 from 54.9 in August.

The future is looking bright for small and medium businesses, with a growing number reporting sales and production recovering from weather-related disruptions.

Standard Chartered (SC) Plc's Small and Medium Enterprises Confidence Index rose to 56 in September compared to just 54.9 in August.

Small and Medium Enterprise Confidence Index tracks SME activity in China.

The growth momentum index also jumped to 11.6 from 6.0 in August, reflecting accelerating sales and falling finished-goods inventory. Of the three key SMEI sub-indices, the current performance sub-index strengthened 2.4ppt and the credit sub-index edged up, while the expectations sub-index moderated 0.1pp.

According to SC, smaller companies appear to be under greater pressure. The key indices for medium-sized enterprises surpassed those for small enterprises, but the gap narrowed in September from August – the current performance reading for medium-sized companies was 1.6ppt higher than for small companies (versus 1.8ppt in August), and the expectations reading was 0.9ppt higher (versus 2.4ppt in August). Medium-sized companies also enjoyed better credit conditions than smaller ones.

"The rebound in the current performance reading for September was mainly driven by the recovery in sales and production as unfavourable weather conditions eased, the summer holidays ended and demand picked up," said SC.

The research firm added that accelerated real activity also boosted SMEs’ profitability and capacity usage.

However, investment appetite remained contained. Expectations relating to total financing, investment and employment weakened, indicating that SMEs’ confidence has not fully recovered. Domestic and export demand remained high. More respondents expected a weaker Chinese yuan (CNY) against the USD on renewed expectations of a Fed rate hike.