The latest Grant Thornton International Business Report (IBR) indicates that the global optimism has slid down 29pp to 32% from the peak in Q1 2018. Over 70% countries ’ optimism has dropped in some extent, and we believe the global trade intention and the political uncertainty might be the reason. 

Optimism in China as the worst in 3 years

According to Grant Thornton IBR, China’s optimism in H1 2019 dropped 11pp to 45%, which is the same as the end of 2016 and also the worst in recent three years. This downward trend reflected to revenue (44%, drop of 6pp), exports (19%, drop of 5pp), profitability (32%, drop of 12pp), investment to new building (-4%, drop of 17pp) and investment to plant and machinery (25%, drop of 17pp).

Business confidence and financial market sentiment have been repeatedly buffeted by the prospect of US actions relating to Chinese technology companies and US tariff actions. While the tensions abated in June, durable agreements to resolve differences remain subject to possibly protracted and difficult negotiations.

However, we found the investment to R&D increased slightly to 44%, and the salary increased from 58% to 63%. 62% of the interviewees agreed that the increase of the salary will be more than inflation or in line with it.
 

Optimism in Japan and Asean opposites

Optimism in Japan plummeted to -40% in H1 2019 by dropping13pp, which made it the last in ranking. Contrarily, Philippine (73%), Vietnam (72%) and Indonesia (66%) are the top 3 on the list. Asean becomes the only area with increased optimism due to the excellent performance of the three countries above.
 

Policy actions played an important role in shaping these outcomes

According to IMF’ s report, the principal risk factor to the global economy is that adverse developments—including further US-China tariffs, US auto tariffs, or a no-deal Brexit—sap confidence, weaken investment, dislocate global supply chains, and severely slow global growth below the baseline. 

One point needs to be noticed is there were positive surprises to growth in advanced economies, and global growth is forecast at 3.2%in 2019, picking up to 3.5% in 2020. However, as the political action is the main reason for sluggish global economy, the forecast is not stable though.

The enterprises are conservative under this circumstance. Our IBR indicates that 52% interviewees will increase the investment on information technology, the investment on employee (48%) and R&D (45%) are following relatively. It is wise to investment in future and we believe it is better to be prepared when the global recession is coming.
* Grant Thornton International Business Report (IBR) is the world's leading mid-market business survey. Launched in 1992 in nine European countries, the report surveys 5000 senior executives in 35 economies on an annual basis, providing insight into the economic and commercial issues affecting both listed and privately-held businesses.
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