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New business opportunities prop up confidence in China against a darkening macro-outlook

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New business opportunities prop up confidence in China against a darkening macro-outlook

Mixed results in latest confidence survey.

Business confidence recovered in mainland China in the second quarter of 2014, returning to levels last seen a year ago, according to the largest regular economic survey of finance professionals around the world.

Thirty per cent of respondents reported confidence gains, up from 25% in the first quarter of 2014, while 43% reported a loss of confidence, down from 53%, The latest findings of the Global Economic Conditions Survey organized by ACCA (the Association of Chartered Certified Accountants) and IMA (the Institute of Management Accountants) show.

"The relative buoyance in China was mostly due to greater opportunities for organic growth."

In Hong Kong, confidence also rose marginally, suggesting that the lows of late 2013 have been mostly overcome, but business performance has become much more volatile. 23% of respondents reported confidence gains, up from 10% previously, while 46% reported a loss of confidence, also up from 36%.

Manos Schizas, senior economic analyst with ACCA said: "The relative buoyance in China was mostly due to greater opportunities for organic growth. In the mainland, readings in this respect were better than at any time in 2013, and in Hong Kong they were better than they've been in at least two and a half years. Despite this, access to growth capital tightened throughout the country. The recovery in the mainland is clearly more robust."

Opportunities for non-organic growth ticked up and a second consecutive quarter of improving cashflow and demand conditions helped keep spirits high. The opposite was true in Hong Kong, where cashflow and demand deteriorated in the second quarter and opportunities for non-organic growth -- already very low by global standards -- fell sharply.

Marginal business confidence gains stand in contrast to a deteriorating macro-economic outlook throughout the country. In mainland China, this change has been mild: 61% of respondents (down from 62%) believe conditions are getting worse or stagnating, against 35% who believe they are improving or about to do so (down from 38%). But in Hong Kong, the macro outlook has darkened significantly: the share of pessimists among the GECS sample has soared from 35% in early 2014 to 62%. Only 35% (down from 52%) are optimistic.

Finally, respondents' expectations of government spending in mainland China fell once again in the second quarter of 2014, suggesting that public investment is not on the road to recovery yet. But the overall investment environment appears to be tapering out, and China's slowdown could soon bottom out into a stable 'new normal.' 

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