Grant Thornton:China business optimism decline in Q3

Newresearch from Grant Thornton’s International Business Report (IBR) revealsthat, affected by the slowdown of China’s stock market since June, businessoptimism in themainland China slipped 20 percentage points to net 26% in Q3-2015. Meanwhile,business expectations for revenue and profit increase have also fallen 6percentage points and4 percentage points to 33% and 28% respectively.

Business expectation to be prudent

According to the research, mainland businessexpressed more concern about economic uncertainty. 39% of mainland businessescite economic uncertainty as the most important factor constraining businesses’development, increasing from 35% in the last quarter. At the same time, theproportion of businesses worrying about the lack of order also up from 31% to36%.

The investment expectation of mainlandbusinesses does not see recovery in Q3 after a drop over last quarter. Expectation in new buildings investmentover the next 12 monthsmaintains at 11%, the same as last quarter. Expectation towards investment in plant and machinery slides to 14% from 17% over last quarter,while research and development investment expectation slightly increases 1 percentagepoint to 32%. Besides,human cost further slides. 54% of businesses expect salary increase over thenext 12 months, down 18pp compared with last quarter. 8% of businesses expectsalary increase rate to exceed the level inflation, decreasing 5pp in contrastwith last quarter. It can be seen that with businesses’ increasing concern oneconomic uncertainty, investment expectation will be more prudent.

Xu Hua, CEO of Grant Thornton China, says: "although China’s economicdevelopment is slowing down, but it still has huge potential forgrowth due to its solid foundation. The economy of mainland China is in the progress of structuraltransition. The overall trend of development is still picking up. We should be confident aboutthe development of our businesses. I believe, with further deepening of the reform, businesses will have moreroom for development.”

European business optimism declines

Theglobal figure for Q3 dropped 7pp to net 38%. Optimism of EU businesses slippedfrom 58pp to 38pp, equal to the figure in Q1. Both Asia-pacific regions and Southeast Asia witness a22pp decrease, to 20% and 18% respectively. Among countries, the figure ofGermany and Greece drop from 92% to 46% and -38% to -60% over the last quarter.

UK andthe U.S. show robust developing dynamic. Although business optimism in UKdecreases by 12pp to 67%, it still ranks the 6th in global businesses optimism rankinglist. The U.S. ranks the 5th with a rise of 20pp to 74%.

Xu Hua, CEO of Grant Thornton China, says:"with the slowdown of the economic growth of emerging economies, we cansee that the exportof European businesses is heavily impacted, leading to the decline of business confidence. The U.S. is still seenas the mostimportant economy in the world.  Thefact that they’re consideringincreasing interest rate for the first time in the past decade, reflecting its stable economic recovery andfurther growth prospect.  . In addition, the unemploymentrate in the U.S.has fallen to historical norm, indicating its effort in employment growth has achieved initial success.”

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