Study unveils growing concern over rising costs, slowing markets

BEIJING / SHANGHAI - Business confidence fell in the fourth quarter, the second consecutive drop, amid growing concern over a slowdown in the world's second-largest economy.

The business confidence index was down 6 percentage points more than the third quarter to 41.7 percent, the People's Bank of China, the central bank, said in a statement on Thursday.

A reading above 50 expresses optimism; anything beneath that figure indicates pessimism.

Of 5,000 companies surveyed, 24.8 percent believe that the economy's temperature is "relatively cool", while a decreasing number believe that things are still going well. The amount holding the latter viewpoint has dropped from 74.3 percent in the first quarter to 67.1 percent now, according to the central bank.

Fang Qi, general manager of Ningbo Shentong Electrical Co Ltd, said the company's profit margin will probably drop by more than 10 percent this year due to falling sales, rising labor costs and dollar depreciation.

"We are now developing new products to attract customers in emerging markets as demand from Europe and the US continues to fall," Fang said. "But the rising cost of labor and raw materials remains a big challenge for us next year."

As a medium-sized vacuum cleaner manufacturer, Shentong's labor costs have risen nearly 20 percent this year, Fang said.

Her woes are shared by Zhang Beilei, the owner of Wenzhou Gaotian Shoe Co Ltd.

"We're not very positive about the current shoe industry. It has been shrinking a lot due to lower demand from abroad and higher costs at home," Zhang said.

Zhang said that slimmer profit margins for small and medium firms will definitely worsen and more companies and factories will be forced to shut down in the coming year.

Wang Haifeng, director of the International Cooperation Center affiliated with the National Development and Reform Commission, said the global economic slowdown, China's reluctance to launch a large stimulus plan and a falling property market are major reasons for declining business confidence.