China prospects undimmed by pandemic, geopolitics: HSBC survey

China remains a highly attractive consumer market and global supply chain hub, despite the ongoing COVID-19 pandemic and geopolitical tensions, a HSBC survey finds.

International businesses are looking to increase the proportion of their China-based supply chains, in addition to strengthening their digital propositions to tap into the Chinese consumer market.

HSBC’s "Navigator: Growing with China" report, which has talked with 1,100 companies across 11 key world markets, was launched on Thursday at the third China International Import Expo in Shanghai.

Contrary to some commentary, many companies are in fact increasing their exposure to China, the survey shows. Some three-quarters of those surveyed, including 70 percent of US companies, said they expect to increase their supply-chain footprint in China over the next two years.

“China remains a key supply chain hub for international corporates,” said Stuart Tait, regional head of commercial banking for Asia Pacific at HSBC.

“While other markets have become more competitive in areas such as labor costs, they are yet to reproduce the sophisticated ecosystem that has developed on the Chinese mainland.”

China's “first in, first out” economic recovery from the pandemic is also fuelling optimism among companies across the world: three-quarters of those surveyed expect sales in, or exports to, China to grow in the next two years, with businesses from Malaysia (88 percent), Mexico (86 percent) and Singapore (84 percent) being the most bullish.

More than three-in-four US companies say they expect sales in, or exports to, China to grow, on par with the global average despite geopolitical and trade tensions. Tellingly, nearly three-in-ten US companies expect growth of more than 20 percent, compared to the global average of 21 percent.

While global companies foresee a broad-based recovery across the Chinese economy, they are noticeably more optimistic about the outlook of service industries over the next 24 months.

They also note an increasing interest in the quality of products, with more people placing a premium on advanced technology, safety and longevity, the report said.

Meanwhile, businesses recognize that the pandemic has accelerated the pace of technology adoption and that they need to join the race if they are to compete.