China’s economic slowdown is spreading to businesses worldwide, according to a quarterly survey of more than 2,500 business leaders in 36 economies.
Grant Thornton’s International Business Report finds business confidence and expectations for revenue and exports have fallen in several major economies that rely on China as a trading partner. While business optimism in the world’s second largest economy slipped 20 percentage points (pp) to net 26% in third-quarter 2015, its top partners saw similar declines: Germany, -46pp to 46%; Japan, -36pp to -28%; Australia, -15pp to 39%; and the ASEAN nations, -22pp to 18%. The survey’s global figure went down 7pp to 38%.
"The slowdown in China is a major concern for the global economy at a time of stuttering growth and heightened uncertainty,” said Francesca Lagerberg, global leader for tax services at Grant Thornton. “The past three months have shown how reliant global growth has become on China; 20 years ago, it was the top export destination for just two countries. Today that figure is 43.”
Growth prospects also took a hit. Fewer ASEAN businesses expect revenues to increase (-21pp to 31%) over the next 12 months, and none of them believe exports will grow. Revenue and export expectations in Germany also have fallen (42pp and 7pp, respectively). In addition, export expectations in Australia declined (-9pp to 5%), while Japan and Brazil registered declines in revenue prospects.
The depreciation of the yuan, however, appeared to improve “export hopes of Chinese businesses (up 5pp to 14%),” the survey notes. “This has also made imports to China more expensive with businesses in Brazil (up 9pp to 47%) and Russia (up 9% to 83%) increasingly concerned about the impact of exchange rate fluctuations on their ability to grow.”
- Diana Mota, NACM associate editor