Cooperation

China’s CEOs have spoken, and new confidence index shows how multinationals’ hopes turned ‘sobering’ in mere months

[ad_1]

Confidence among multinational companies in China has sharply deteriorated in the past half-year, according to fresh findings by an international non-profit think tank that reflect how interest in expanding investment and recruitment has waned in a time of slow economic growth and persistent geopolitical wrangling.

The results also further underpin the shared sentiment among many economists, policy advisers and business groups that Beijing will need to take more aggressive measures to revitalise the market and lure back foreign investors.

In its “Measure of CEO Confidence for China” report on Tuesday, The Conference Board said the confidence rating – on a 100-point scale – had fallen from 72 to 54 in the span of just six months, and it pointed to the nation’s slower-than-expected economic recovery.

A rating over 50, however, means that most responses from 35 CEOs polled last month were still more positive than negative, as the twice-yearly barometer gauges the perceptions of China-based chief executives, mostly with US and European multinationals operating in the country.

CEOs’ views are clear on the most pressing risks for their business in China: geopolitical tensions and China’s economic slowdown

Alfredo Montufar-Helu, The Conference Board

And CEOs in China appear more confident than their peers in the US and Europe, who had a more negative outlook with sub-50 ratings.

The think tank said executive sentiment in China has become “more sobering” since the first half of the year. The sales outlook has dropped markedly, and expectations for capital investment and recruitment have fallen into negative territory.

“CEOs’ views are clear on the most pressing risks for their business in China: geopolitical tensions and China’s economic slowdown,” said Alfredo Montufar-Helu, head of the China Centre for Economics and Business at The Conference Board.

Among the polled China CEOs, 71 per cent said that demand in their own industry remained below pre-Covid levels, and their sentiment regarding capital investments over the following six months worsened to 46 in the second half, down from 55 in the first half.

And 40 per cent of China CEOs now expect a decrease in capital investments, up from just 9 per cent six months ago.

The index measuring CEOs’ employment outlook in China also dropped to 46 over the next six months, down from 54 in the first half, and nearly one-third of those polled expected to reduce headcount, up from just 9 per cent in the previous survey.

“Views are mixed about the longer-term outlook … and nearly half say a prolonged period of low growth may provoke a course change by Chinese policymakers toward increased marketisation, private-sector liberalisation, and/or a broader opening to foreign investors,” the survey report said.

Beijing is still facing the daunting task of getting economic growth back on a resilient and sustained path after unveiling measures to revitalise private business, salvage the property market, curb local-government debt risks, and retain China’s market allure to foreign investors.

Capital-outflow pressure has been mounting amid concerns about China’s economic recovery over the long term, and against the backdrop of US-led tech controls. Beijing’s heightened focus on national security, including a revamping of anti-espionage laws, has also fuelled concerns about investment conditions, further compounding the predicament.

In another report this month by the Peterson Institute for International Economics (PIIE), an American think tank that cited new Chinese data indicating that “foreign firms operating in China are not only declining to reinvest their earnings but – for the first time ever – they are large net sellers of their existing investments to Chinese companies and repatriating the funds”.

For the first three quarters of 2023, such investment sell-offs exceeded US$100 billion and are likely to increase, according to the PIIE report.

“The investment sell-offs are contributing to downward pressure on the value of the Chinese currency and, if sustained, would modestly reduce China’s potential growth,” said Nicholas Lardy, non-resident senior fellow at the Peterson Institute, on the organisation’s website.

Lardy explained that “the spike in US-China tensions”, “Beijing’s closure of foreign consultancies and due-diligence firms”, and China’s “increasingly stringent regulatory environment, including restrictions on cross-border data flows” were all factors that foreign firms had taken into consideration when deciding to reduce their direct investments.

[ad_2]

Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button