Confidence Among CEOs of Major MNCs Wanes as Economic Weakness Persists

Trusted Insights for What’s Ahead™: The Conference Board Measure of CEO Confidence™ for China

• The Measure of CEO Confidence™ for China remains in positive territory, at 54, but dropped markedly from a record-high of 72 just six months ago. Back in April, confidence levels surged on the heels of China lifting all COVID restrictions and strong Q1 economic results. Now that slower growth has resumed, and amidst continued geopolitical volatility, CEO sentiment has become much more somber. This moderation was to be expected and is in line with expectations for a prolonged period of economic stress. The Measure of CEO Confidence ranges from 0 to 100, with a reading below 50 points reflecting more negative than positive responses.

• CEO views of current economic conditions have clearly downshifted in lockstep with market realities and their outlook remains cautious. In H2, just 31 percent of CEOs surveyed said general economic conditions were better compared to six months ago, down substantially from 88 percent in H1. Over two-thirds of CEOs (71 percent) say demand has not returned to pre-COVID levels. Consistent with this, optimism about the short-term outlook has decreased: 51 percent of CEOs expect economic conditions to improve over the next six months, but this is down from 79 percent in H1. 

• CEO expectations about the sales outlook also dimmed markedly, while the outlook for capital investment and hiring both dropped into negative territory. Less than half of CEOs (46 percent) expect their sales in China to increase over the next six months, compared to 76 percent in H1; but only 17 percent expect sales to actually decrease. Views are more sobering on investment and hiring, with 40 percent of CEOs expecting a decrease in capital investments and 37 percent a reduction in headcount over the next six months, both up notably from just 9 percent in H1.

• CEOs’ views are clear on the most pressing risks for their business in China: geopolitical tensions and China’s economic slowdown. Managing geopolitical issues is also creating an additional drag on cost and efficiency for businesses: 51 percent of CEOs say negative costs and efficiency impacts are high, 37 percent moderate, and only 9 regard them as insignificant. 

• Views are mixed about the longer-term outlook. 60 percent of CEOs say their level of concern is high regarding the 2-year growth outlook, and only 9 percent say it is low or they aren’t concerned. But more than half believe Chinese demand will be above the global average five years from now, and nearly half say a prolonged period of low growth may provoke a course change by Chinese policymakers toward increased marketization, private sector liberalization, and/or a broader opening to foreign investors, while the other half are on the fence.