Go to search feature Go to content
Language

You need to use a different browser. To be able to use our internet services, you can instead use one of these browsers: Apple Safari, Google Chrome, Microsoft Edge or Mozilla Firefox.

Read more about recommended browsers

SEB’s China Financial Index signals clear weakening of long-term optimism

Juliette Xue Lascoux, General manager of SEB Shanghai

SEB’s China Financial Index, an indicator of business sentiment among northern European companies’ subsidiaries in China, dropped to 53.6 in November last year, from 57.8 in the previous survey conducted in May.

The latest survey shows growing market uncertainty, particularly related to customer demand, as well as a dampened business outlook over the next six months. This index value is now at its lowest level since May 2020, when the situation was heavily influenced by the onset of the Covid-19 outbreak. Even so, the results are aligned with expectations – as forecasted growth projections failed to materialize, companies are taking a more cautious stance on growth projections.

“The result is well in line with our general observation in China,” says Juliette Xue Lascoux, General manager of SEB Shanghai. “The overall business sentiment among Northern European companies have deteriorated in general during 2023, although performance vary between different companies and industries.”

Despite grappling with decelerating growth and a crisis in the real estate sector, China remains on course to meet its GDP growth target of 5 per cent in 2023.  In November 2023, The International Monetary Fund revised its growth forecast for China to 5.4 per cent. SEB’s GDP growth projection for 2023 holds at 5.2 per cent, which is consistent with the forecast SEB made in August.

Over the past three years, competition in China has intensified, resulting in diminishing profit margins. This is reflected in the survey, with “customer demand” deemed to be the most pressing concern, as voiced by more than half of the respondents. This represents a steady increase from 45 per cent to 53 per cent in the past six months. Fears of supply-chain disruptions are long gone, and geopolitical worries are receiving less attention. Geopolitics and competition rank as the second and third largest concerns, accounting for 16 per cent and 12 per cent, respectively.

Overall, surveyed companies exhibit a general downward trend in growth projections over the next six months. Expectations for sales and profit are lower compared with the figures from May. However, on a year-over-year comparison, companies are more optimistic, suggesting that economic recovery predictions were overestimated. 

Investment levels show signs of stagnation, as more companies report investment plans to remain unchanged, awaiting market developments before committing to any new investments. Workforce planning follows the same trend, as fewer companies report an increase in staff recruitment. Despite signs of waning market confidence, China remains a crucial market for many Northern European companies.

“Expected risk-adjusted return on investment in China has decreased due to fierce local competition and heightened geopolitical risks. Many European companies are looking into ways to adapt their China strategy to this new reality,” says Juliette Xue Lascoux.

Participants experiencing changes in their view on political and geopolitical risks have decreased to 46 per cent, down from 52 per cent in the preceding six months. Among those noting a change, 65 per cent reported a “slight impact” while 27 per cent saw a “large impact”. Eight per cent observed “no impact” on their operations in China.

China’s regulatory environment is becoming increasingly stringent and concerns regarding China’s regulatory landscape and cybersecurity space have intensified. More companies express worries about China’s data and cybersecurity. For example, technological decoupling is becoming a growing concern, as indicated by 9 per cent of the surveyed companies compared with 3 per cent in May. 

“Companies’ investment appetite has dampened and so has the business outlook for the next six months. The view on geopolitical risk seems to have stabilized and the main source of worry for Northern European companies now lies within China’s borders. Despite weaker business sentiment among companies surveyed, there is little indication that companies are planning to exit. Instead, companies are taking a more cautious stance, awaiting the next market developments in China,” says Juliette Xue Lascoux.

About the Survey
SEB’s China Financial Index was first launched in 2007 and is today based on input from CEOs, CFOs or Treasurers at 60 subsidiaries of major Swedish, Finnish, Norwegian, Danish, German, British and Swiss companies. The latest survey was conducted between 11-24 November 2023.

For further information, contact:
Juliette Xue Lascoux, General Manager of SEB Shanghai
+86 21 2052 1818
juliette.lascoux @seb.se

Press contact:
Niklas Magnusson, Head of Media Relations & External Communication
+46 70 763 8243
niklas.x.magnusson@seb.se

SEB is a leading northern European financial services group with international reach. We exist to positively shape the future with responsible advice and capital, today and for generations to come. By partnering with our customers, we want to be a leading catalyst in the transition to a more sustainable world. In Sweden and the Baltic countries, SEB offers financial advice and a wide range of financial services. In Denmark, Finland, Norway, Germany and the United Kingdom, we 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 our presence in more than 20 countries worldwide, with around 17,500 employees. At 30 September 2023, the Group's total assets amounted to SEK 4,134 bn while assets under management totalled SEK 2,194bn. Read more about SEB at sebgroup.com.