Focus topics

Growth of foreign companies severely impaired

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  • The National Bureau of Statistics (NBS) monthly discloses the financial performance of different industrial companies categorized by ownership, thereby providing data on some business performance developments of foreign companies in China.​
  • In the first half of 2022, Foreign Invested Enterprises (FIEs) recorded only a year-over-year revenue growth of 1.8%, compared to 11.8% by SOEs and 7.8% by domestic private enterprises. The growth data is also clearly falling short of that in 2021 period (14.8%).​
  • Especially during April and May, the activities of FIEs are affected severely by covid lockdowns in large industrial cities like Shanghai, Beijing and Changchun, significantly damaging their sales growth.​
  • In terms of profitability, the statistics do not look as worrisome. Overall, FIEs managed to maintain a profit margin in the Chinese market. FIEs achieved 7.1% operating profits to sales in the first half of 2022, slightly lower than the level of the full-year 2021 (7.9%). However, it is higher than the level during the same period in 2020 (6.25%) and 2019 (6.28%)​
  • Whether faltering sales growth and shrinking profitability will become the “new normal” for foreign enterprises in China remains to be observed over the coming months, as more data becomes available to deduce structural changes. ​
  • The (limited) data thus far appears to confirm the overarching trend: acute zero covid disruptions plus systemic challenges in the Chinese economy (shrinking labor population, rising debt leverage, etc.) combined with the pressures of ongoing geopolitical decoupling between China and the US and EU, are creating a highly challenging business environment for MNCs operating in China.​

Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.


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