China businesses’ optimism on economic prospects in 2013 rises with a bottom-out of the macro economy in Q4 2012.
Although it is still at a lower level compared with the first half of 2012, the Q4 optimism index has see a rise to 19% , from 11% in Q3,demonstrating an increasing confidence of China businesses on the economy in 2013.
Investment expectation rises
The survey reveals that concerns over shortage of working capital and skilled working force in Q4 eases
compared with the status in Q3.
Among the respondents, 30% cite the shortage of working capital as the primary factor of restraining business expansion and 27% believe that the shortage of skilled working force is the biggest constrain, both down 9 percentage points from the previous quarter.
The businesses now have sufficient capital and talent due to a more conservative expansion strategy in early months, laying the groundwork for a further development in 2013.
Therefore, the businesses are aggressive in making development strategies for 2013. According to the
survey, China businesses’ investment in new factories/machines and R&D all climbed by approximately
10 percentage points from the level in Q3, to 24%, 40% and 61%, respectively.
Meanwhile, the businesses’ expectation on the rise of employee salary over the next 12 months also increases by 10 percentage points to 70%. China businesses also maintain confidence in their corporate growth.
The businesses’ confidence in the growth of operating revenue and strength of profitability over the next 12 months continues to boost in Q4, up 6 and 8 percent respectively, to both of 90%. This signals the businesses’ full confidence in their corporate development amid current economic environment, and thus
their investment expanded.
“A series of economic data show the domestic economy is recovering," says Xu Hua, CEO of Grant Thornton.
"On the other hand, development plans unveiled by the government such as so-called Income Doubling Programme will boost consumption and increase GDP growth."
The survey also tells that the export expectation for China businesses rises by 11 percentage points from the previous quarter.
"Despite of continued uncertainties of economy in the United States and Europe, the emerging markets keep stable and China’s exports will see a solid rebound. In the midst of a relatively stable domestic and overseas economic climate, the businesses show greater growth confidence and expansion expectations,” notes Hua.
Global business optimism declines
The IBR survey also reveals that the global business optimism falls to 4%, close to the freezing point level (0%) observed the same period in 2011, due to a significant fall of business optimism in the United States.
The US business optimism hit a record 50% in Q2 2012, but slumped to 19% in Q3 and further plummet to -4% in Q4 ,the lowest level since the financial crisis in 2008.
Expectations for the growth of operating revenues and profitability fell by 10 and 9 percentage points respectively over the past three months. This chimes with research from Grant Thornton US which suggests 40% of CFOs have delayed decision making because of fiscal cliff concerns.
“Although the US Congress has agreed on solutions for the fiscal cliff, the problem has not been resolved completely," says Ed Nusbaum, CEO of Grant Thornton International. "There are remaining concerns that the US economy may suffer recession again, leading to decline of consumption, weakening of investor confidence and erosion of corporate profits. We hope that these issues can be resolved completely, and the drop in confidence is a temporary setback rather than the start of a longer decline.”