A net balance of +14% of firms anticipate output to increase over the next year, which is up only slightly from June’s record low of +9%.
That said, the latest figure is in line with the global average, with the latter having fallen to a fresh survey low in October.
Sector data shows that the slight uptick in optimism is due to stronger confidence in the manufacturing sector, as expectations weakened across the service sector.
A net balance of +17% of goods producers in China forecast higher output over the next 12 months, up from a record low of just +5% in the summer.
In contrast, the net balance of services firms anticipating growth is the lowest seen in the survey’s history (+11%).
Positive forecasts are generally linked to expectations of stable market conditions, rising client demand, supportive state policies, greater investment in new products and increased use of automation.
Stricter environmental policies are seen as both an opportunity and a threat, as they may weigh on competitors, but also limit production of some firms and industries.
Other factors weighing on confidence include the ongoing USChina trade dispute, rising raw material prices, tough market competition, uncertainty and difficulties finding suitable staff.
Employment growth across China is forecast to be relatively weak over the next year.
A net balance of just +4% of firms expect to increase their staff numbers, up only slightly from an all-time low of +1% in June.
Services companies are marginally more upbeat about future job creation than manufacturers, with net balances of +6% and +1% respectively.
In line with the trend for employment, capital investment intentions picked up slightly from June’s record low, but remain historically subdued (net balance +10%).
Confidence regarding capex in China is, however, slightly above the global average (+8%).
Operating expenses faced by Chinese companies are forecast to increase over the next year.
Panel members anticipate staff and non-staff costs to rise at similarly strong rates, with net balances of +17% and +16% respectively.
On both counts, manufacturers anticipate faster rates of cost inflation than their service sector counterparts.
Despite expectations of rising input costs, businesses operating in China plan to raise their output charges only slightly over the next 12 months.
Companies often cited that greater competition for new business is likely to weigh on overall pricing power, with both manufacturers and services firms anticipating marginal rises in their output charges.
Following stagnant profit projections in June, Chinese firms are forecasting improved profitability over the next year.
However, the net balance of firms predicting an increase in corporate earnings is only +5%, with both goods producers and service providers expressing relatively subdued levels of optimism. ■