By Erin Ennis
Next week, the US-China Business Council will release the key findings of its 2016 annual member survey. This year’s report will be released in sections highlighting the results in each area covered by the survey. The key findings focus on the overall business outlook for companies doing business in China.
Among the results:
Foreign companies’ business outlook for China reflects the economy’s slowing growth
- China’s growth slowdown is affecting American company financials and market sentiment. Nearly 20 percent expect revenue to decline in 2016, but two-thirds anticipate continued growth.
- Companies are responding in expected ways—cutting costs, slowing investment, and controlling hiring, but they are not pulling investment out of China.
- Despite slowing revenue growth, 90 percent of companies’ China operations remain profitable, but at reduced rates that reflect increasing competition, rising costs, and regulatory impediments.
- Business confidence continues to soften. Almost three-quarters of companies have an optimistic or somewhat optimistic five-year outlook for their businesses in China, a dip from the previous year. Optimism is the softest it has been in a decade. Eighteen percent classified their view as neutral, the highest in that category during the same timeframe. Pessimism remains low, at 10 percent.
Uncertainty about China’s policy direction toward foreign companies is undermining confidence in the market
- Three years after China announced far-reaching reform goals, most American companies are not seeing significant changes in the business environment.
- The biggest driver of reduced business confidence is the policy and regulatory environment, followed by the market slowdown, and profit margins squeezed by increasing competition, rising costs, and overcapacity.
China still outpaces other markets for growth and remains a priority market for American companies
- Despite the challenges of a slowing economy and increasing domestic competition, China remains a priority market for American companies: 91 percent of companies say China growth prospects are the same or better than other emerging markets.
The full set of key findings will be released during the week of August 22.
Read the full report here.
Copyright: US-China Business Council
