The drumbeat of noise from the financial community about how China could be in a credit bubble that will end badly became louder yesterday in a survey of accountants around the world.

The drumbeat of noise from the financial community about how China could be in a credit bubble that will end badly became louder yesterday in a survey of accountants around the world.

A Global Economics Conditions Survey from ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants showed that that respondents in China reported the tightest supply of growth capital in at least two years, suggesting that the country's official and shadow banking sectors are taking a significant hit.

"In early 2013, GECS findings indicated that China had avoided the 'hard landing' analysts had predicted for the past two years. However, China's problems are far from over. Credit rationing and fears about private and public sector debt have continued to damage the Chinese recovery and the crunch appears more prevalent on the mainland, while businesses in Hong Kong still appear to have reasonable access to growth capital, Emmanouil Schizas, ACCA senior economic analyst, said.

Other firms, such as Rothschild Wealth Management, Pictet Asset Management, and others, have voiced concerns about the amount of debt in the country and the possible consequences. On the other side, a number of wealth managers have praised what they see as the relatively bold economic and business reform package unveiled by the ruling Communist Party recently.

"As a result of these pressures, business confidence has been falling throughout China over the last six months, with concerns accelerating in the third quarter of 2013. Only 20 per cent of respondents in the mainland and 5 per cent of those in Hong Kong reported confidence gains in Q3. Although respondents in the mainland have been consistently more confident than their colleagues in Hong Kong, their views may soon begin to converge,” Jane Cheng, head of ACCA Hong Kong, said.

She acknowledged that in other respects, however, financial professionals are more optimistic longer-term.

"However concerned they might be for their own organisations, Chinese finance professionals are telling us they are optimistic about the country's economic recovery and the authorities' ability to respond to challenges. Following a sudden deterioration in the second quarter of 2013, perceptions of the recovery are clearly on the rise again in mainland China, while respondents in Hong Kong have recorded a full year of improving perceptions."

The study showed that overall, 40 per cent of respondents felt that the economy was improving or about to do so, up from 36 per cent in the second quarter, and 52 per cent felt that conditions were deteriorating or stagnating, down from 60 per cent previously. However, ACCA and IMA warn that this optimism could prove short-lived if China's credit crunch persists beyond the fourth quarter of 2013.

Global outlook

Collectively, across the world businesses were more optimistic about the economy than they have ever been since the survey was launched, and more confident about their own prospects than at any time since the end of 2010.

Schizas said: "What GECS shows us is that monetary policy, real and potential, has now become a stronger influence on business confidence than demand or business opportunities. That's a sure sign of trouble brewing. The idea of a global recovery has taken hold worldwide and the business community is generally optimistic about macro-economic developments even as they doubt the prospects of their own organisations. This is not really sustainable - and it is more likely that recovery expectations are going to re-align themselves with that low business confidence, than vice versa.