Economy

CEOs ‘cautiously optimistic’ about China’s economy amid ‘new competitive reality’


Chief executives of multinationals remain “cautiously optimistic” about China’s economy in the face of downgraded consumption, tough competition from local firms, regulatory disruption, harder-to-win profits and geopolitical uncertainty, according to a new survey.

CEO confidence in China inched up marginally to 56, from 54 six months ago, on a scale from 0 to 100, with a reading below 50 points reflecting more negative than positive responses.

The survey, conducted by The Conference Board, was carried out between April 9 and 24, with a response rate of 72 per cent of 43 members of the non-profit business research group invited to participate.

“The combined effect of market, economic, policy and geopolitical factors are leading to the emergence of a new competitive reality that is putting business resilience to the test like never before, and which is challenging old notions about the China opportunity that were generated over the previous decades of high, rapid, and inclusive growth,” said Alfredo Montufar-Helu, head of the China Centre for Economics and Business at The Conference Board.

According to the survey, 35 per cent of CEOs said that current conditions are better than six months ago – up from 31 per cent in the second half of last year, but the figure is still significantly lower than 88 per cent in the first half of 2023.

Regarding long-term potential, 51 per cent of CEOs said that Chinese demand would be at least above average globally five years from now, and 26 per cent said that it would be on par with other major markets.

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Chinese-made electric vehicles face additional EU import tariffs of up to 38%

Chinese-made electric vehicles face additional EU import tariffs of up to 38%

CEOs said that strong alignment with headquarters on China strategy, planning, and risk management, with sufficient authority to make independent decisions, is vital to success in a more complicated Chinese market.

“A recalibration of strategies is needed to defend market share by strengthening core competencies and improving risk management, all while maintaining robust alignment between global headquarters and China operations,” Montufar-Helu said.

The survey also showed that 35 per cent of CEOs said China’s ties with the European Union would get worse over the next three years, while 55 per cent said the China-US relationship would decline in the coming years.

Twenty-nine per cent of respondents said their companies are establishing second sources and production capabilities in other regions, such as India, Southeast Asia and North America, to diversify their investments.

The non-profit organisation measures the sentiment of CEOs in China and Europe biannually. The latest survey showed that business leaders’ confidence in Europe returned to positive territory, rising to 58 in the first half of this year from 42 six months ago.

In the US, where the survey is run quarterly, CEO confidence also rebounded to above 54 for the second quarter of this year, up from 46 two quarters ago.



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