Slight Uptick in Confidence Among China-Based CEOs Amid Growing Risks

Business confidence among CEOs of multinational corporations in China has seen a marginal improvement over the past six months, according to the latest Conference Board Measure of CEO Confidence™ for China. This semi-annual survey, which includes CEOs from predominantly US and European multinational companies operating in China, revealed an increase in the confidence index from 54 to 56. Despite this slight rise, business leaders still face significant challenges, including China’s economic slowdown, escalating geopolitical tensions, and intensifying local competition.

The survey assessed sentiments on current and future business conditions, sales and investment outlooks, and the primary risks facing businesses. While the overall confidence score moved up, the improvement stemmed from a decrease in outright negative sentiment rather than an increase in positive outlooks.

Key risks identified by CEOs include China’s economic slowdown (61%), geopolitical tensions (55%), and competitive pressures driving down prices (48%). A considerable portion of CEOs (35%) are postponing investments until more favorable conditions emerge, and 58% anticipate shifting investments and operations from China to India within the next two years.

The percentage of CEOs with positive views on current conditions rose slightly from 31% in H2 2023 to 35% in H1 2024. However, this remains significantly lower than the 88% in H1 2023. Additionally, CEOs reporting worse conditions dropped from 39% in H2 2023 to 23% in H1 2024. At the same time, 52% of CEOs expect moderate improvements in business conditions over the next six months, similar to the 51% in H2 2023. Only 13% foresee worsening conditions, down from 23% in the previous survey.

Regarding the sales outlook, 55% of CEOs expect sales to increase, 10% foresee a decrease, and 35% anticipate no change. This compares to 46%, 17%, and 37% respectively in H2 2023. Fewer CEOs expect increased capital investments (19% vs. 24% in H2 2023), but those anticipating a decrease in investments have dropped from 40% to 23%. Interestingly,  32% of CEOs plan to reduce headcount, down from 37% in H2 2023, while only 6% expect to increase staff.

Major concerns include China’s ties with Russia, industrial overcapacity, and the strategy to derisk from China. To mitigate risks, 71% of CEOs are enhancing their “in China for China” activities, and 29% are building capabilities outside China for resilience. Additionally, 58% expect a shift of investments and operations to India, with significant movement also anticipated towards Southeast Asia (48%) and North America (42%).

Alfredo Montufar Helu, Leader of The Conference Board China Center for Business and Economics, highlighted the evolving competitive landscape in China. He noted that weak consumption, fierce local competition, and geopolitical tensions are reshaping the perception of opportunities in China.

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