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Rising entrepreneurial confidence in China’s economic vitality

Updated: Apr 20,2017 2:27 PM

China’s economy achieved an uptick in the first quarter of 2017, following the steady implementation of reforms promoting economic structural transformation and upgrades.

The GDP of the world’s second largest economy witnessed a 6.9 percent growth year-on-year in the first three months, with many economic indicators showing positive projections.

Amid such promising momentum, Chinese companies are becoming increasingly confident in the current economic climate.

Improved domestic and international economic environments also led to the growing confidence of companies.

In the first quarter (Q1), the entrepreneur confidence index rose to 61.5, 7.4 points higher than that of last quarter, and 17.8 points higher than the same period last year, according to the People’s Bank of China. The number of new registered companies also hit nearly 1.3 million, and private investment increased by 7.7 percent.

Crucially, market conditions have improved. The global financial system has witnessed a modest recovery, and more economies are recognizing China’s Belt and Road initiative, creating positive conditions for Chinese companies to expand into foreign markets and strengthen the rapid development of exports.

Furthermore, industrial inventory adjustment had a positive impact on the economy, as the Producer Price Index in Q1 saw a 7.4 percent growth year-on-year. In addition, income and profits of State-owned companies witnessed a 19.2 percent and 23.2 percent growth respectively year-on-year.

Reforms also continue to result in dividends. Efforts to address overcapacity, reduce inventory, deleverage, lower costs and bolster areas of weakness have paid off. In Q1, the industrial capacity utilization rate reached 75.8 percent, 2 points higher than that of the previous quarter. Debt-to-assets ratio and costs at industrial companies were also lowered.

Innovation is also playing a bigger role in development. Strong policy measures have been carried out to implement modernization strategies such as mass entrepreneurship and innovation, encouraging the development of emerging industries and optimizing economic structure.

In Q1, as traditional industries continued upgrading, knowledge-technology intensive and high value-added emerging industries rapidly expanded. Substantial growth of industrial robots, photo-electronic devices and online retail brought solid economic development.

Q1 also saw labor productivity reach around 23,227 yuan per person, 6.7 percent higher than that of the same period last year in real terms. Profits of many businesses such as the internet and related services saw profits reach a 69.4 percent growth year-on-year. Software and information technology service business profits saw a staggering 403.2 percent growth year-on-year.

In light of these developments, one thing is certain. In the coming months, the market will witness more investment and strengthened innovation efforts, injecting more driving forces into the country’s macro economy.