Beijing, 17 Jun. 2019 | The 2019 edition of the Business Climate Survey, conducted every second year by Team Sweden in China, was presented in Beijing and Shanghai on June 10 and 13 respectively.
Attending in Beijing was Ambassador Helena Sångeland and in Shanghai, Consul General Lisette Lindahl. Also in attendance were close to 30 company representatives in each city as well as representatives of Business Sweden and SwedCham.
Introducing this year's report, Business Sweden's David Hallgren and Joakim Abeleen, as well as SwedCham's Martin Vercouter, focused on some of the key trends from the survey:
- Respondents were 102 Swedish companies in China, represented by one top-level representative each. They were divided according to main sector of activities in Consumer (17), Professional Services (31) and Industry (54). Size-distribution is even across sizes (employee count worldwide).
- Revenue and profit for responding companies were both growing in 2018, although in general top line is increasing faster than bottom line, and the picture is getting different across sectors. The mode of 2018 y-o-y revenue growth distribution is at +15-20%, in line with annual reports published so far (+16%). Overall 66% report revenue increase 2017-18 (compare to EU average 59%).
- Generally speaking, professional services come out on top in terms of reported (2017-18), forecasted (2018-19) growth in revenue and profit, while Industry is showing signs of divergence between sub-sectors.
- The Chinese market is growing in importance for group revenue: two-thirds of respondents have China in top 3, and number share of China as number 1 market increased 7pp over 2017 to 2019 (24 to 31% of respondents).
- In line with above, 89% cite access to China market as main reason for presence in the country (In 2013: 42%) and 71% of companies doing sales do so inside China.
- At the same time, China is rising in importance as a hub to serve APAC region (only 40% serve only China, 21% serve whole APAC). But beware of challenges with difficulties of data & capital flow across borders (see below).
- The business climate is overall positive, up slightly from 2017, and expectations on future climate are that it will remain unchanged or improve (with less than 20% predicting a less favourable climate over coming three years), although again more nuanced when zooming in on sectors.
- Legal and regulatory framework is #1 concern, replacing Discrimination against foreign companies, indicating that there is cautious optimism about policy promises but also continued concern about their implementation and unchanged limitations of the legal system such as uneven enforcement, overriding interests, and specific laws such as cybersecurity law, etc.
- Swedish firm boast high quality as main competitive advantage, and focus on innovation and digitalisation (also increasingly in B2B) to compete, but have a disadvantage in cost structure and lack of access to government.
- At the time of the survey, 50% of the respondents did not perceive any impact of the US-China trade conflict, and among impacted companies the largest group (23%) say uncertainty is delaying investment. But the picture might have changed during Q2.
- Swedish firms, irrespective of size, see Chinese SMEs as their biggest competitors in China, while State-Owned Enterprises are only seen as a main competitor by 16% of the respondents, mostly in Industry.
- With regard to sustainable business, responding companies are very active, 76% have CSR as part of company strategy with Environmental Issues as #1 priority.