Amid COVID-19 Easing... Chinese Market Business Sentiment Hits Highest in 2 Years

Korea Institute for Industrial Economics and Trade Announces Q3 Business Survey Index (BSI) for Companies Entering China
Market Conditions 91, Sales 95... Highest Since Q3 2018
Manufacturing Sales Baseline Recovered... Large Enterprises Surpass 100 for First Time in 2 Years

[Asia Economy Reporter Kim Bo-kyung] The business sentiment index reflecting the market conditions and sales of Korean companies operating in China recorded the highest level in two years for the third quarter of this year.

As China recovers from the impact of the novel coronavirus disease (COVID-19), the business sentiment index has continued its rebound for the second and third consecutive quarters.

The Korea Institute for Industrial Economics & Trade, the Beijing Office of the Korea Chamber of Commerce and Industry, and the Korean Chamber of Commerce in China announced on the 18th the Business Survey Index (BSI) for the third quarter of this year, based on a survey of 213 Korean companies operating in China.

A BSI above 100 indicates that the number of companies responding positively was greater, while below 100 indicates the opposite.

The overall companies' current BSI rose to 91 for market conditions and 95 for sales, marking the highest level since the third quarter of 2018 (market conditions 95, sales 102). This represents an increase of 24 points and 23 points respectively compared to the previous quarter.

The BSI for sales to third countries rose the most sharply by 48 points to 94, and raw material purchases increased by 32 points to 127. Facility investment recorded 102, up 20 points.

By industry, the sales BSI for manufacturing rose 24 points to 100, recovering the baseline.

Electrical and electronics (138) recorded the highest level since statistics began, while automobiles (103) decreased by 7 points but remained above 100.

Chemicals and textiles/apparel rose by 13 points and 46 points to 80 and 83 respectively, still below 100. Distribution also increased by only 17 points from 50 to 67.

By company size, large enterprises rose 15 points to 111, surpassing 100 for the first time since the third quarter of 2018. Small and medium-sized enterprises (93) also increased by 24 points, reaching the highest level since the fourth quarter of 2018.

Korean companies operating in China cited weak local demand (29.1%) and sluggish exports (19.7%) as their main management difficulties. However, labor shortages and rising labor costs (34.4%) are increasing, especially in the electrical and electronics sector.

The distribution sector continued to face difficulties due to weak local demand (33.3%) and exports (20.0%).

Large enterprises reported high levels of export sluggishness and labor shortages/labor cost increases, both at 25.9%, while small and medium-sized enterprises cited weak local demand as the highest at 30.6%.

In a survey on the impact of the COVID-19 situation, 73% of all companies responded that they were negatively affected. This is a significant decrease compared to 90% in the first quarter and 85% in the second quarter. The response of 'no impact' rose by 12 percentage points from the previous quarter to 27%.

By industry, negative responses decreased mainly in manufacturing, but remained high in automobiles (83%) and distribution (83%).

Among the details of negative impacts, management difficulties due to increased uncertainty (36%) and decreased demand (36%) accounted for the largest shares. Compared to the previous quarter, these decreased by 4 percentage points and 15 percentage points respectively.

Responses regarding supply chain disruptions (15%), labor issues (7%), city lockdowns (7%), and financial problems (4%) all decreased compared to the previous quarter.

The BSI outlook for the fourth quarter showed market conditions (101) exceeding 100 for the first time since the second quarter of last year, and sales (108) also turned upward compared to the previous quarter (102).

Local sales (115) and Korean resale (105) outlooks exceeded 100, and facility investment (100) recovered the baseline. The business environment (110) exceeded 100 for the first time since statistics began.

The sales outlook BSI exceeded 100 in manufacturing (107) and distribution (117). Within manufacturing, electrical and electronics (100), automobiles (137), and chemicals (130) exceeded 100, while metal machinery (97) and textiles/apparel (87) remained below 100.

By company size, large enterprises rose 19 points to 107, surpassing 100 for the first time in four quarters, and small and medium-sized enterprises recorded 109.

This content was produced with the assistance of AI translation services.