We hear different stories and sentiments about China's economic condition every day.
Some are more anecdotal than scientific, some look like public relations spin, but decent-sized polls conducted in the right ways usually offer good information.
The latest annual survey by the European Union Chamber of Commerce in China, with input from more than 540 European companies operating in China, sheds some light on what's really happening in China.
Pessimism about growth and profitability has forced European businesses to cut back significantly, particularly through headcount reduction, the Chamber said. It published the report on June 10.
Here are the numbers that back up that statement.
• 39 percent of the companies plan to cut costs — a large jump from just 24 percent in 2014.
• Of those companies, 61 percent plan to reduce headcount, 52 percent plan to reduce procurement costs and 36 percent plan to reduce rental expenses.
• 58 percent remain optimistic about growth prospects, 10 points lower than last year. The number has been declining every year since 2010.
• Only 28 percent are optimistic about profitability prospects, another five-year low.
• Almost a third are putting investments on hold.
To be honest, I had the same impression at Chinaplas last month, but it was difficult to pin down because everybody tried to present their best possible images to me in formal interviews. But their facial expression, body language and other subtle details sometimes gave away their inner feelings. That's just my theory and some subjective observation in the rearview mirror.
There are bright spots too. According to the survey, more than 40 percent reported year-on-year sales growth in the range of 5 to 20 percent, 17 percent reported higher than 20 percent growth and 25 percent reported stable sales (+/- 5 percent).
But more importantly, the EU Chamber survey also shows that despite China's troubled state, it doesn't seem like there are many better investment alternatives.
The majority of respondents (84 percent) choose to withhold investment rather than shifting investment to other markets. In other words, China remains a key market for them.
Looking forward, the Chamber leaders once again called for a level playing field for foreign investors in China's business environment.
Chamber President Jörg Wuttke stated: “European companies continue to view better implementation of the rule of law as the top driver for China's economic development going forward. However, they are unconvinced to what extent this is forthcoming: Disappointment in China's reform agenda is palpable within the international business community, as regulatory barriers and market access issues have not sufficiently been dealt with.”
Sun is an assistant managing editor for Plastics News and managing editor of the Plastics News China website. Follow her on Twitter @NinaYingSun.
