The Xinhua Finance/MNI China Business Survey is conducted with the aim of providing an accurate picture of business trends of enterprises in China. The survey takes a look at the number of companies that believe the economy is improving against those who believe it is not. Survey questions were modeled after the Bank of Japan's tankan survey and the U.S. Institute for Supply Management's Report on Business.

In each survey, participants are asked to give their qualitative judgment on the status of current operating conditions versus actual conditions a month prior and forecasted conditions three months ahead. The thirteen categories subject to evaluation are:

• Overall business conditions (better/same/worse)
• Productive capacity of company (better/same/worse)
• Production (rising/ same/ falling)
• Prices received (rising/ same/ falling)
• Interest rates (rising/ same/ falling)
• New orders (rising/ same/ falling)
• Supplier deliveries (slower/ same/ faster)
• Number of employees (too few/ just right/ too many)
• Company financial position (better/same/worse)
• Inventory levels (rising/ same/ falling)
• Order backlog (rising/ same/ falling)
• Input prices (rising/ same/ falling)
• Availability of Credit (better/same/worse)

Compiling this general indication of sentiment, a percentage is calculated for each category for the total sample pool. An index is also constructed for each by halving the middle ‘unchanged’ percentage and adding the result to the top. An index figure greater than 50 indicates a trend in line with the first sentiment choice.

The survey pool is limited to domestically or cross-listed Chinese companies. In the interest of providing a well-rounded picture of business conditions in China, Xinhua Finance/MNI selects participants across a wide range of industries. Companies agreed to participate in the survey and provide comments about business conditions under a condition of anonymity. Individual survey responses are not divulged. The Survey will become a monthly survey at the end of October 2006 after successfully charting the fortunes of China's business community on a quarterly basis since January 2005.