SEB's China Financial Index: Slightly worsened business climate and lower profit expectations - but expansion plans remain
(Thomson Reuters ONE) -
China's economy has continued to slow down during the first half of 2013. New
political leaders in Beijing have communicated that they will accept lower but
more qualitative growth than previously, driven to a greater degree by
consumption and less by investments and exports. In July and August, economic
data indicated a bottoming out of the Chinese downturn. Only one-third of top
managers at North European companies in China have a positive view of the market
and profit expectations in the region, while slightly more companies than
previously, around 15 percent, have a negative view on the coming six months.
All parameters in SEB's China Financial Index - business climate, profit
expectations, investment plans and recruitment plans - are slightly lower, and
the index falls to 58 in September from 60.8 in March.
The percentage of surveyed companies that see lower customer demand as a main
concern has fallen to just below 40 percent. Meanwhile, one out of three
companies view competition as their largest worry, double the number in the
previous survey in March. Expansion plans in China have fallen slightly, but
companies continue to invest. Six out of ten respondents plan further
investments. 15 percent of companies plan significant investments, which is the
same number as in March. Four out of ten companies plan further recruitments,
which is slightly lower than in the last survey. Ten percent of the companies
plan to decrease the number of staff in China.
"Optimism among companies has fallen slightly since the last survey, but the
index is still stronger than it was one year ago. It is evident however that
forecasts have become less certain than in March. Expansion plans are still
offensive, but more companies than previously are choosing to wait with further
investments. Many manufacturing companies suffer from over-capacity in China and
are taking the oppurtunity to make their organisations more cost-efficient,
which is probably why more companies are waiting with further recruitments or,
in certain cases, are even cutting down the number of employees. We do see large
differences between industries however," says Fredrik Hähnel, Head of SEB in
Shanghai and author of the report.
Even if the Chinese economy grew faster than other leading economies, the
country has experienced slowing growth in nine out of the last ten quarters.
Growth for the second quarter 2013 ended at 7.5 percent, a bit lower than the
7.7 percent rate in the first quarter. However, economic signals like industrial
production, exports and purchasing manager indices have been improving in July
and August, indicating that the economy is turning upward.
Mixed signals in China make North European companies slightly less optimistic
about the future in the region. Around one-third of respondents now have a
positive view of the coming six months, whereas the number of companies with a
negative view has gone up from 10 percent to 15 percent. Half of the companies
have a neutral view. Slightly less than half of the companies expect profits to
increase, which is a marginal decrease from the last survey. Very few companies
believe that profits will fall in the coming six months.
"The picture is very much in line with what we experience in discussions with
clients. This is by no means a dramatic change but rather a gradual adjustment
of expectations as more companies realise that China's growth will be lower than
what we have been used to in the last couple of decades. Generally speaking,
companies are positive about the future in China, expecially those selling to
the Chinese consumer market. At the same time, it can be concluded that certain
industrial companies are witnessing flat sales, or in some cases even lower
sales in 2013 compared to the previous year," says Fredrik Hähnel.
Thirty-three percent of respondents see lower customer demand as a main concern,
which is slightly lower than in the last survey. Around one-third view
competition as their largest concern, which is twice the number seen six months
ago. Other important issues are a complex regulatory system and lack of
qualified staff.
"When growth in many industries is not as high as previously, the competition
for market share becomes increasingly important. Particularly in sectors with
over-capacity, we will see pressure on margins for a foreseeable future, and
among Chinese companies there will be consolidation," says Fredrik Hähnel.
Half of respondents believe that the renmimbi will remain unchanged against the
US dollar. Six out of ten companies anticipate stable interest rates. Salary
increases are down. One-third of the companies expect salaries to increase by
5-6 percent in 2013 while only two out of ten companies calculate with a salary
increase of 9-10 percent or more.
"A slightly less certain business climate combined with low inflation mean that
companies see an opportunity to hold down salary increases in their Chinese
subsidiaries. It remains to be seen, however, if it will be possible to hold
down salary increases in reality without losing staff, as many Chinese employees
have gotten used to large annual salary increases," says Fredrik Hähnel.
This is the tenth edition of SEB's China Financial Index, a unique semi-annual
survey. The purpose is to mirror changes in expectations among North European
companies in China in order to facilitate understanding of economic and
financial development in the country. The survey was carried out from 26 August
- 5 September, and includes a total of 12 questions related to the business
climate, investment plans, recruitment plans and the view of currencies and
interest rates. An index level over 50 signals overall positive sentiment. The
full report can be downloaded from: www.sebgroup.compress.
For further information, please contact Presskontakt
Fredrik Hähnel, Head of SEB in Shanghai Anna Helsén, Press Officer
+86 1381 680 99 77 +46 70-698 48 58
fredrik.hahnel(at)seb.se anna.helsen(at)seb.se
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SEB is a leading Nordic financial services group. As a relationship bank, SEB
in Sweden and the Baltic countries offers financial advice and a wide range of
other financial services. In Denmark, Finland, Norway and Germany the bank's
operations have a strong focus on corporate and investment banking based on a
full-service offering to corporate and institutional clients. The
international nature of SEB's business is reflected in its presence in some
20 countries worldwide. On June 30, 2013, the Group's total assets amounted to
SEK 2,596 billion while its assets under management totalled SEK 1,387
billion. The Group has about 16,000 employees. Read more about SEB at
www.sebgroup.com.
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Press release PDF:
http://hugin.info/1208/R/1728267/577136.pdf
China Financial Index Sep 2013:
http://hugin.info/1208/R/1728267/577141.pdf
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Source: SEB via Thomson Reuters ONE
[HUG#1728267]
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Datum: 11.09.2013 - 09:31 Uhr
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