Caixin
Dec 03, 2020 07:08 AM
BUSINESS & TECH

Chinese Businesses See a 2-Year Slog for Full Profit Rebound

A man flies a kite on the Bund while buildings of Pudong's Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai
A man flies a kite on the Bund while buildings of Pudong's Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai

Most businesses operating on the Chinese mainland expect profitability to return to pre-pandemic levels by the end of 2022, according to a report published Wednesday by HSBC Holdings Plc, the biggest player in global trade finance.

The study was based on a survey of more than 10,000 enterprises worldwide conducted jointly by HSBC and market research company Kantar Group. Among the 1,000 participating companies on the Chinese mainland, 78% projected that full recovery from the pandemic would take two more years. At the same time, 83% of the Chinese companies said they were optimistic about the business outlook.

Business in China will recover at slightly faster than the global pace and will lead the world, the report found, cautioning that possible coronavirus resurgence and geopolitical issues may pose uncertainties. The study was conducted between September and October and surveyed businesses in around 40 countries and regions.

The findings dovetail with other recent soundings showing gathering business momentum in China. Manufacturing activity achieved its fastest growth in a decade last month, a Caixin-sponsored survey showed. Meanwhile, analysts estimated that China’s economic recovery would stay on track in the fourth quarter and into next year. In a note Monday, economists at Nomura International (Hong Kong) Ltd. forecast year-on-year GDP growth of 5.7% for the fourth quarter, up from actual growth of 4.9% in the third quarter.

“We expect China’s GDP growth to rebound to 8.2% in 2021, led by exports and domestic consumption,” Wang Tao, head of China economic research at UBS Investment Bank AG, said in an opinion piece published last week.

Chinese companies in the HSBC study said they expect 2021 revenue to grow an average of 62% from this year, 24 percentage points lower than last year’s forecast. Average revenue growth is projected at 60% for the Asia-Pacific region and 64% for the world.

Supportive policies, proper supervision and tax incentives are the key factors seen by Chinese companies for driving their business recovery, while most companies said a domestic consumption revival and sustainable growth are their top concerns, according to the report.

About 83% of the companies surveyed in China said they were optimistic about international trade in the next two years, higher than the global average of 72%. Among Chinese companies, 66% said they plan to continue expanding into global markets, the report found.

Japan was listed by 16% of the Chinese companies surveyed as their most important overseas market, while 11% cited the U.S. More than 40% of Chinese companies said their top overseas market is in the Asia-Pacific region.

Meanwhile, 18% of companies in the Asia-Pacific region said the Chinese mainland will remain their top business partner, compared with 16% citing the U.S.

China has overtaken the U.S. as the top foreign market for companies across Asia-Pacific, HSBC said in another report released Tuesday. The U.S. was the biggest trading partner among 28% of businesses polled, just behind China’s share of 29%, HSBC said.

Compared with mainland counterparts, businesses in Hong Kong expressed deeper concerns over post-pandemic recovery, HSBC said in the Tuesday report. Among Hong Kong companies, 72% said they expected profitability to return to pre-pandemic levels by the end of 2022 while 53% said the business environment would become tougher.

Business disruptions caused by the pandemic elevated supply chains as a priority for many companies. Almost all companies surveyed on the mainland and in Hong Kong said they adjusted supply chains over the past year in response to the pandemic, including efforts to diversify and digitalize supply chains.

Most companies also put a priority on enhancing regional cooperation, developing new markets and improving supply chains to bolster future growth, said Fang Xiao, vice president of HSBC China.

Guo Yingzhe contributed to this story.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caxin.com).

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