The Chinese economy is changing. Many economists are expecting that economic growth in China fueled by investments in industry, real estate and in infrastructure will decline even further in the coming years. The Chinese government also anticipates this development, and believes GDP growth will remain in between 6 to 7 percent for the years to come.
To encourage development of the Chinese economy and to become less dependent on the construction- and manufacturing industries, the Chinese government aims to stimulate more qualitative growth by redefining the focus of the economy on domestic consumption. Even Xi Jin Ping explains that ‘for the next five years, development should not be focused on its pace, but on its growth volume, and predominately quality’. The Chinese government have named this development the ‘New Normal’ and explained that on one hand the Chinese economy must accept lower growth, but on the other hand must learn how-to and strive to become more sustainable (via domestic consumption).
Though the Chinese economy is growing at a stronger pace than many European countries and even the rest of the world, the opinion outside-of-China about the economic developments within China remain largely negative. News about the ‘housing bubble’, fluctuations on stock exchange in China, rising debt of Chinese enterprises, and decline within manufacturing industries etc., do not paint a good picture of the Chinese economy. There seems to be a broad consensus that economic growth is expected to decline even further and the future of China accordingly does not look bright.
Impact on Benelux companies in China?
A lot has been said and written about the developments of the Chinese economy, however not much is known about the impact on Benelux (i.e. Belgium, the Netherlands, and Luxembourg) companies active within China and how they foresee these changes. What consequences will the ‘New Normal’ have on Benelux companies active within China, and what impact shall this have on the results and expectations of these companies? Do they expect these changes will have a negative impact on their business, or are Benelux companies even positive about the developments of the Chinese economy?
In collaboration with 1421 Consulting and the Benelux Chamber of Commerce, we (Moore Stephens Consulting China) have asked via the Sino Benelux Business Survey 2016 these questions to Benelux companies active within China and have investigated the impact of the changes of the Chinese economy. Starting from early March 2016, we have distributed a questionnaire to Benelux companies active all over China and received many insights from them on their performance, expectations and opinion about the Chinese economy.
Results of Sino Benelux Business Survey
During previous year’s business survey we learned that, despite the slowdown of the Chinese economy, Benelux businesses were still performing well. Some were even beating the market with revenue growth above 10% and good profit levels. On the other hand, some challenges still remained. Rising salary costs has been one of the major negative drivers of Benelux companies, they have also indicated that increasing rules and regulations would impact their company.
Many changes happened again in 2016 including regulatory, foreign exchange and tax reforms. We have seen increasing focus on domestic consumption and rapid development of new industries based on new technologies (e-commerce, mobile payments, V.R etc.). Other global developments might impact geopolitical and economic balances and as a result also Benelux companies active in China. How have Benelux companies performed this year within this context? What are now the main challenges for Benelux companies in China? How will changes of the past year impact your business and how to adapt to these changes? This year’s survey will answer these questions and will provide Benelux companies active in China a better understanding of the changing Chinese economy.
Please click on the following link to read the full report on the Sino Benelux Business Survey.