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SCMP Reporter

Mainland businesses lowered their overall economic expectations in the first quarter, a sign that manufacturers and service providers are feeling the bite of a slowdown in the  United States economy and soaring raw material prices.
The China business prosperity index released by the National Bureau of Statistics  yesterday  dropped  7.4 points to 136.2  in the first quarter, its lowest level since the third quarter of 2006.
The survey polled 19,500 mainland businesses about  the country's overall economic situation. The index ranges from zero to 200 points.
The bureau said the decline was due to extreme weather conditions in the south and an apparent slowdown in world economic growth.
'The decline shows that businesses have started paying more to buy materials than they usually do and that's not good news,' Renmin University economics professor Zhao Xijun said.
Mr Zhao said the key risk factor was the faster than expected slowdown of the US economy, which would have a negative impact on  mainland exporters.
Total exports accounted for 36 per cent of the economy last year, while the trade surplus accounted for about 20 per cent  of economic growth.
Many export-orientated companies were under pressure as export growth fell to 16.8 per cent in   January to February,  from 41.7 per cent during the same period last year, Mr Zhao said.
At the same time, companies had  to pay more for raw materials due to international market conditions and inflation at home.
'Those pressures will be passed on to customers when the products hit the market, which could further exacerbate the overall economic situation,' he said.
The World Bank and the Asian Development Bank have already lowered their forecasts for the country's economic growth, citing various international and domestic reasons.
The central government seems to have recognised the challenge, announcing in an April 1 news release that preventing an economic slowdown was a priority.
'It's a market consensus that the slowdown of the US economy will have a negative impact on the world's economy. No one is exempted,' ADB economist Zhuang Jian said.
He said that although the economic climate index had dropped a bit, it was still at a relatively high level and mainland businesses could still post good numbers by taking advantage of other opportunities.
'We all know large-scale investment increases are inevitable as a large number of newly elected officials get ready to make their mark in their new positions.  An increase in investments is an excellent remedy for an economic slowdown,' Mr Zhuang said.
He said  businesses could also cash in on opportunities in the  infrastructure repairs required in snowstorm-stricken areas in the south.
The  government had promised higher fiscal spending on power, transport and agriculture.



US slump, soaring costs dim business sentiment