SEB’s China Financial Index Shows Decline in Business Outlook for Northern European Companies Amid Geopolitical Tensions

SEB’s China Financial Index Shows Decline in Business Outlook for Northern European Companies Amid Geopolitical Tensions

(IN BRIEF) SEB’s China Financial Index for 2024 revealed a drop to 52.0, indicating a challenging business environment for northern European companies operating in China. This decline, the lowest since May 2020, reflects concerns over customer demand, local competition, and geopolitical instability, particularly following the US presidential election. The survey shows that most companies expect only modest sales growth, with many facing profitability challenges. Investment plans remain stable for most, though geopolitical concerns, particularly US-China relations, have become a growing issue. Overall, the results highlight the uncertainty businesses face in the current Chinese market.

(PRESS RELEASE) STOCKHOLM, 9-Jan-2025 — /EuropaWire/ — SEB’s China Financial Index, which tracks the business outlook of subsidiaries from northern European companies in China, fell to 52.0 at the end of 2024, down from 55.3 in June. This decline reflects the growing challenges faced by businesses operating in China, as the environment becomes increasingly difficult.

“Renewed pessimism among survey participants mirrors broader shifts in sentiment seen among foreign businesses in China,” said Juliette Xue Lascoux, General Manager of SEB Shanghai. “Although the Chinese government has announced efforts to stimulate the economy, the perception is that these measures have not been enough. Key concerns remain focused on customer demand and intense local competition. Additionally, rising fears over a potential trade war following the US presidential election are contributing to the negative outlook.”

The 52.0 reading marks the lowest level since May 2020, shortly after the onset of the COVID-19 crisis in China. All four components of the index—order intake, investment outlook, staffing outlook, and profit outlook—showed a decline by the end of the year, compared to June’s survey. The current index is 9.5% below its historical average, representing the most significant negative deviation since the pandemic’s early impact.

Respondents indicated an overall expectation of declining performance. Regarding sales, most anticipate modest growth of around +/- 5%, with only 1% expecting more than 20% growth. Profitability has proven to be a challenge, as 57% of participants predict their profits will be close to break-even. Meanwhile, the share of those expecting profit growth has fallen to 23%, while 19% expect their profits to shrink. Notably, for the first time in three surveys, 2% of respondents foresee their profits being cut by more than half.

Investment plans remain largely unchanged, with 67% of respondents indicating no shift in their intentions, aligning with previous years and national foreign direct investment trends. However, 28% of respondents foresee only modest investments, a slight drop from the previous survey but slightly higher than in 2023, suggesting a stabilization in investment patterns.

The top concerns for businesses remain customer demand, competition, and geopolitics, with geopolitics surpassing customer demand for the first time (20% vs. 19%). This shift can be attributed to concerns over the US election and its implications for US-China relations. Other emerging concerns include rising labor costs and fluctuating foreign exchange rates, which had not been prominent in earlier surveys.

Interestingly, although the survey respondents are primarily northern European companies, a greater number expressed concern about the US-China relationship than the EU-China relationship. The percentage of respondents worried about US-China tensions rose sharply from 49% in June to 67%, reflecting growing anxiety about the impact of the US election result on US-China relations.

SEB is a leading northern European financial services group with international reach. We exist to positively shape the future with responsible advice and capital, today and for generations to come. By partnering with our customers, we want to be a leading catalyst in the transition to a more sustainable world. In Sweden and the Baltic countries, SEB offers financial advice and a wide range of financial services. In Denmark, Finland, Norway, Germany and the United Kingdom, we have a strong focus on corporate and investment banking based on a full-service offering to corporate and institutional clients. The international nature of SEB’s business is reflected in our presence in more than 20 countries worldwide, with around 19,000 employees. At 30 September 2024, the Group’s total assets amounted to SEK 4,142bn while assets under management totalled SEK 2,709bn. Read more about SEB at sebgroup.com.

Media Contacts:

Juliette Xue Lascoux
General Manager of SEB Shanghai
+86 21 2052 1818
juliette.lascoux@seb.se

Petter Brunnberg
Head of Media Relations & External Communication
+46 70 763 35166
petter.brunnberg@seb.se

SOURCE: Skandinaviska Enskilda Banken AB (SEB)