SEB : SEB's China Financial Index: Rebound for North European companies.
Increased demand and higher profit expectations
China's economy bottomed out during the second half of 2012, and an increasing
number of indicators now point to improved business conditions. Government-led
stimulus packages, relatively loose monetary conditions and positive export
figures have contributed to an improved business climate. Half of top managers
at North European companies in China now have a positive view on the market
and profit expectations in the region. After three consecutive surveys with
falling sentiment, SEB's China Financial Index in March increases to 60.8
from 56.1 in September.
The percentage of surveyed companies that see lower customer demand as a main
concern has fallen from 70 per cent to just above 40 per cent. Companies have
increased expansion plans slightly in China, and two out of three respondents
plan further investments. 15 per cent of companies plan significant
investments, which is the same number as in September. A bit more than half of
the companies plan further recruitment, which is higher than the last survey.
"Optimism among companies has increased since the last survey, and it is
evident that order books are looking better than in September. Investment
plans are also increasing albeit only marginally, as some manufacturing
companies still have overcapacity in China and are awaiting more signs of a
robust rebound in the economy. Furthermore, companies did not slow investment
plans much last year, despite negative economic signals," says Fredrik Hähnel,
Head of SEB in Shanghai and author of the report.
The Chinese economy grew by 7.9 per cent during the fourth quarter 2012
compared to 7.4 per cent for the third quarter. Several indicators in China
now point in the direction of a modestly rebounding economy, and full-year
growth for 2013 looks to be better than in 2012. During 2013, SEB economists
expect China to grow by 8.1 per cent.
Increasingly positive signals in China make North European companies more
optimistic about the future in the region. Around half of respondents now have
a positive view of the coming six months, whereas the number of companies with
a negative view has fallen from one-third to only ten per cent. The remaining
forty per cent have a neutral view. Slightly less than half of the companies
expect profits to increase, which is an increase from the last survey. Very
few companies believe that profits will fall in the coming six months.
"Regardless of whether you believe the current Chinese growth model is
sustainable or not, it is obvious that governernment stimulus for
infrastructure and other projects at the end of last year is having a positive
effect on business conditions for industrial companies. Meanwhile, private
consumption should increase in China for many years to come, which is why
companies selling directly to Chinese consumers are generally more positive
than industrial companies," says Hähnel.
44 per cent of respondents see lower customer demand as a main concern, which
is down from 70 per cent in the last survey. 16 per cent view competition as
their largest concern. Other important issues are a complex regulatory system
and lack of qualified staff.
"That fewer companies worry about a fall in customer demand further
strengthens the picture that the order book is improving. It is also obvious
from the survey that there is a shift towards more concern over increasing
competition, as foreign investors see an increasing number of Chinese
competitors moving up the value chain and taking market share," says Hähnel.
Half of respondents believe that the renminbi will strenthen against the US
dollar. Seven out of ten companies anticipate higher interest rates. One-third
of the companies also expect salaries to increase by 7-8 per cent in 2013
while four out of ten companies calculate with a salary increase of 9-10 per
cent or more - a rate well above the 2 per cent annual inflation level in
China in January.
"The competition for competence is fierce, and employees are still
faster-moving when it comes to recruitment compared to most developed
markets," says Hähnel.
This is the ninth 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 18-22
February, 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.com\press.
For further information, please contact Press Contact
Fredrik Hähnel, Head of SEB in Shanghai Anna Helsén, Press Officer
+86 1381 680 99 77 +46 70 698 48 58
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
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 December 31, 2012, the Group's total assets amounted
to SEK2,453 billion while its assets under management totalled SEK1,328
billion. The Group has about 16,500 employees. Read more about SEB at
Press release (PDF)
China Financial Index March 2013
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Source: SEB via Thomson Reuters ONE
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