International CEO Confidence

Confidence among locally-based CEOs of multinational companies operating in China has deteriorated in the last six months, falling to its lowest point since China abandoned its zero-COVID policy in late 2022.

 After seeing a slight uptick in the first half of 2024, The Conference Board Measure of CEO Confidence™ for China fell below the 50-point mark, indicating more negative responses than positive ones. In the latest assessment for h3 2024, the index declined to 49, down from 56 six months prior. The downturn is evident across all three sub-indexes: current business conditions, future business conditions (i.e. six months from now), and future industry conditions (i.e. six months from now).

Notably, there is a marked sense of pessimism among CEOs regarding current business conditions, with the sub-index declining to 43, ten points below the 53 score in H1 2024. 41% of CEOs say that current business conditions are worse than six months ago, a substantial increase from 23% in H1 2024. Nevertheless, 57% of CEOs note that profits generated in China remain higher than those in other regions, suggesting that China will continue to be an important source of growth against a backdrop of global economic weakness.

CEOs’ views about the longer-term are also markedly more optimistic, with 65% expecting Chinese demand to be at least above the global average, and 32% expecting it to be on par with major markets five years from now.

“Conditions facing multinational businesses operating in China are currently extremely challenging, with 76% of CEOs citing China’s economic slowdown as the biggest risk facing their business. CEOs of MNCs are having to contend with highly price-sensitive customers, who are seeking steep discounts or holding off on current purchases”, said Alfredo Montufar-Helu, who heads The Conference Board’s China Center. “The situation is compounded by the approach of local competitors, who are not only more agile in responding to market changes, but are also more willing to take risks and lower prices to increase market share. In the longer-term, CEOs are more optimistic, but there’s no doubt that multinationals are having to make tough decisions to compete in the current climate.”

Among the report’s highlights:

Current and future business conditions:

• 41% of CEOs say that current business conditions are worse than six months ago, an increase from 23% in H1 2024.
• The percentage of CEOs that expect business conditions to improve over the next six months has dropped significantly, down to 32% from 52% in H1 2024.
• Almost a third of CEOs (32%) expect conditions in their own industries to worsen, compared with 16% in H1 2024.

Sales, Profits, Investment & Hiring Outlook:

• The percentage of CEOs expecting sales to increase over the next six months decreased to 29%, from 55% in H1 2024.
• 41% of CEOs expect a near-term decrease in profits, significantly up from 19% six months ago.
• More than a third of CEOs (38%) expect to see a decrease in capital investments over the next six months, while just 15% expect them to increase.
• Only 6% of CEOs expect to increase headcount over the next six months, while more than a third (38%) expect to reduce headcount.

Risks Affecting Business in China:

• Over three quarters (76%) of CEOs cite China’s economic slowdown as a the top risk affecting their business in China.
• This is followed by downward pressure due to local competitiveness intensity (59%) and geopolitical tensions (53%).
• The gap between the top three risks and the rest is very pronounced, indicating a broad consensus on the key risks.
  
  

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