Beijing: Signalling serious concerns about the country’s stringent monetary tightening policy and periodic rises of interest rates, China's Business Climate Index (CBC) declined to 133.8 in the first quarter. The stringent policies have been adopted to tame inflation and curb asset bubbles in the country.

The index, a main gauge of corporate performance, declined to 133.8 in the first quarter of this year from a three-year high of 138 in the last quarter of 2010, China's National Bureau of Statistics (NBS) said.

It signals increasing concerns about the country's monetary tightening policy and interest rate rises, it said.

The business climate index is a major measure reflecting the macroeconomic outlook and the trend of future developments.

The increasing cost of borrowing may slow down the pace of economic growth and increase pressure on Chinese companies, HSBC Holdings Plc said in a report released on Friday.

The NBS sub-index for the real estate industry decreased the most among all surveyed sectors to 135.3 in the first three months from 148.4 in the fourth quarter of last year.

"Annual reports from some listed real estate companies already indicated tight cash flows because of restrictions on home purchases and the rising cost of borrowing," Wang Ren, chief strategy analyst at Ping An Securities Company Ltd, told a newspaper.

After a marked decline in property sales during March, some of the capital currently invested in the real estate sector may move to the stock markets in the next few months, said Wang.

The measure for medium-sized companies was 133.5 and 157.2 for large businesses.

Nine consecutive rises in the required reserve ratios for banks since the start of 2010 mean that companies are finding it increasingly difficult to borrow money from banks, especially small- and medium-sized operators, said Li Xunlei, chief economist at Guotai Junan Securities Co Ltd.

"Small- and medium-sized enterprises will be affected the most by the tight monetary policy," Li said.

The business climate sub-index for the retail sector came in at 153.2, a rise of 3.6 points from the last reading, the highest among all industries.

In the IT sector, the measure decreased to 150.4 in the first quarter from the previous figure of 159.7.

The business climate sub-index for the retail sector came in at 153.2, a rise of 3.6 points from the last reading, the highest among all industries.

In the IT sector, the measure decreased to 150.4 in the first quarter from the previous figure of 159.7. Entrepreneur confidence dropped the most in the real estate industry to 112.3, but rose in the retail and social services sectors, the NBS report said.

(Agencies)