China's business climate index, a key gauge of corporate performance, continued to drop year on year in the second quarter despite a slight recovery from the first quarter, Monday official figures showed.

The index, based on a survey of 19,500 Chinese firms, rose to 137.4 points in the second quarter from 136.2 in the first quarter, but 8.6 points down from last year's second quarter, said the National Bureau of Statistics.

Rising costs of land, labor and energy resources, accompanied by tightened credit, contributed to the index fall, said Deputy Director Cai Zhizhou of China Center for National Accounting and Economic Growth, Peking University.

"Pressured by higher costs and fund restraints, Chinese enterprises are going though a transition period," he said.

Cai said it was urgent for the enterprises to change the development mode relying on high energy and resource consumption.

Large-, medium- and small-sized enterprises all reported declining climate indices from last year's first quarter. Their second-quarter levels were 155.9, 125.3 and 115.7 points, respectively.

Information technology and software sectors continued to post a higher climate index, which rose 4.4 points to 162.9 from the same period last year.

Compared with the first quarter, industrial companies gained 2.4 points to 135.7, construction went up to 144.2 points, while the real estate stayed at almost the same level at 131.8 points.

Wholesale, retail, transport, hotel and eatery sectors all fell from the first quarter.

"The index was a natural reflection of the slower economic growth," said Cai.

China's gross domestic product in the first quarter rose 10.6 percent year-on-year, but the growth rate was 1.1 percentage lower than a year earlier.

The business climate index, with the 100-point mark as the mark between depression and prosperity, tumbled to 116.6 points, its lowest level since the outbreak of SARS in 2003. It has since stayed above 130.

(Xinhua News Agency July 7, 2008)