Chinese households report falling confidence: BoComm

A new survey carried out by one of China's major State-owned banks has revealed that Chinese households expect their fortunes to shrink dramatically in the next six months.

Bank of Communications Ltd collected data from 1,955 households with an after-tax annual income of at least 50,000 yuan ($7,936).

The findings show more than 50 percent of households were pessimistic on future employment prospects, and expected the unemployment rate to rise in the next six months to the highest since the end of 2010.

Nearly half of respondents thought that the current economic environment is worse, compared with six months earlier, which suggested the efforts being made to kick-start the recovery were not strong enough.

The results were used to compile the bank's Climate Index of China's Wealth, which fell from 120 in August to 113 in September, its lowest level since August 2010.

The confidence index is based on expectations of income growth and investment returns in the next half year, based on the individuals' own economic conditions. A reading above 100 means a growth in household wealth, while that below 100 means a decline.

The report concluded the weakened economic sentiment was the result of slow economic growth, dragged down by slackening global demand and operational difficulties being experienced by growing numbers of Chinese companies.

Lian Ping, Bank of Communications' chief economist, highlighted that for the first time since August 2010, the sub-index gauging confidence in current investment returns, dropped to below the expansion/contraction line to 98 in September, from 107 in August, and 134 in July.

"Willingness by households to invest in both liquid assets and real estate has declined. And it is unlikely that will improve, given respondents felt house prices will grow sharply within the coming year," said Lian.

He predicted the government may strengthen its economic policies during the final quarter of 2012, but did not expect any moves to be aggressive.

The National Bureau of Statistics is expected to announce its economic growth report for the third quarter on Thursday, which many economists suggest will show continued weakening in the growth rate of exports, and a cooling in real estate investment.

Lu Zhengwei, chief economist at Industrial Bank Co Ltd, has forecast that it expects growth in the three months to September to slip to 7.4 percent, 0.2 percentage points slower than the second quarter, and down from 8.1 percent in the first three months of the year.

The bank has suggested the domestic wealth management sector could be boosted by a lowering of minimum investment requirements, and a broadening of financing channels.

With this in mind, the Bank of Communications report added: "Diversified investment tools are needed to retain and increase households' asset value to win back their confidence."