SEB's China Financial Index, which measures the business outlook among northern European companies' subsidiaries in China, dropped to 52.0 at the end of the year 2024, from 55.3 in June. The survey shows that respondents consider the business environment to be increasingly challenging. 

"Renewed pessimism among the survey respondents reflects the sentiment swings seen among other foreign business players in China. Despite a series of announcements from the Chinese government about its intention to support the economy forcefully, the view seems to be that the measures implemented so far have not been sufficient. Customer demand and local Chinese competition remain top concerns for northern European companies in China. In addition, there are elevated fears in China of a possible trade war following the US presidential election." says Juliette Xue Lascoux, General Manager of SEB Shanghai.

The survey reading of 52.0 is the lowest since May 2020, just after the Covid-19 crisis first hit China. All four components of the index (order intake outlook, investment outlook, staffing outlook and profit outlook) weakened at the end of the year compared with the survey in June. The index is now 9.5 per cent below its historical average, the most negative deviation since May 2020.  

The survey shows that respondents expect a worsening overall performance. In terms of the sales outlook, majority expect sales growth to hover around +/- 5 per cent. The share of respondents that expect pure growth decreased (i.e. only 1 per cent expect over 20 per cent growth). In line with anecdotal observations, profitability has been a challenge. 57 per cent of survey respondents expect profit to be about break-even. The share of respondents expecting profit growth dropped to 23 per cent while those that expect shrinking profit increased to 19 per cent. For the first time in the past three surveys, 2 per cent of the respondents expect profit to be cut by more than a half. 

Investment plans remain unchanged for most of the survey respondents (67 per cent), in line with the results last year and national statistics for foreign direct investment. Around 28 per cent of respondents expect modest investments. Though lower than the previous survey (35 per cent), it is slightly higher than the same period in 2023, thus showing a stabilisation of the investment trend.  

As in the previous survey, the top three concerns chosen by respondents remain competition, customer demand and geopolitics. However, for the first time, geopolitics (20 per cent) outweighs customer demand (19 per cent) as the top concern, partly explained by the US election result and its potential impact on US-China relations. A few other concerns, such as labour costs and volatile foreign exchange rates, surfaced for the first time compared with previous surveys.  

Even though the survey respondents are northern European companies, more of them are concerned about the US-China relationship than about the EU-China relationship. The share of respondents concerned about the US-China relationship increased to 67 per cent, from 49 per cent In the June survey, indicating an unfavourable interpretation of the US election outcome.  

About the survey
SEB's China Financial Index was first launched in 2007 and is based on input, in this edition, from CEOs, CFOs or Treasurers at 70 subsidiaries of major Swedish, Finnish, Norwegian, Danish, German, British and Swiss companies. The survey was carried out between 11 November and 6 December 2024.