1. VDMA Business Climate Survey China November 2016 Survey Results
All Members’ Edition
| Richard Hinz, Daniel Yoo

2. Agenda Part I: All members‘ section Participants benefit more
General economic outlook
About the survey
Basic findings
Main implications
Participants benefit more
Benefit from participation
How to participate
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

3. Part I: All members‘ section
The following results are available to all VDMA member companies.
Part I: All members‘ section
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

4. General economic outlook (1/3)
Turnover of the mechanical engineering industry in China – incl. VDMA member companies and other foreign-funded companies – to increase by 3% in 2016 in real terms.
In nominal terms growth is only 2% due to low producer price indices, especially at the beginning of the year.
For 2017, VDMA economists, currently, also expect 3% growth in real terms.
Lately, industrial producer prices have been on the rise again, mainly due to higher prices of major raw materials. Increasing prices for certain raw materials might function as a stimulus for related mechanical engineering sectors.
Despite existence of overcapacities concerning public infrastructure as well as residential or commercial property in some areas, government promotes further urbanization (e.g. „Jing-Jin-Ji“ project).
VDMA Business Climate Survey China November 2016
Photo: Nonwarit - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

5. General economic outlook (2/3)
Some industries in China might also rely on government‘s efforts concerning international development and traffic ways („One belt, one road“ project)
Many industries require further automation and high- technology in order to enhance productivity and satisfy customer needs
But currently, private investment in fixed assets is still growing at low rates, partly compensated by higher government investments
Private consumption not yet tapped its potential
Growing middle class
Differentiating consumption patterns
Rising awareness for quality goods
Government willing to support private consumption in order to compensate for lower investment dynamics and reduce dependancy of exports
VDMA Business Climate Survey China November 2016
Photo: Nonwarit - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

6. General economic outlook (3/3)
Chinese exports might be at risk not only in case of low global demand, but also in case of frictions with USA concerning tariffs or currency policies
Negative effects to all Chinese economy and beyond might also evolve in case of serious imbalances in the financial sector, though that case does not seem very likely because government reacted quickly in similar situations in the past
VDMA Business Climate Survey China November 2016
Photo: Nonwarit - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

7. About the survey Survey duration: 4 - 30 November 2016
791 top executives of affiliates of VDMA member companies in China were adressed
If an affiliate is active in more than one mechanical engineering sector, participants were asked to answer for as many of these sectors as possible
Furthermore, participants were asked to provide answers for as many of their companies‘ customer industries as possible
105 participants completed the survey (response rate: 13,3%)
 112 datasets concerning mechanical engineering sectors
 131 datasets concerning customer industries
VDMA Business Climate Survey China November 2016
Photo: pressmaster - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

8. Current business situation
48% of the participating affiliates consider their current business situation as normal, while 35% of them answered clearly positively and 17% clearly negatively.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

9. Current utilization of production/service capacities
The results concerning the current utilization of the affiliates’ production or service capacities are quite similar to the current business situation.
The share of “normal” is 7 percentage points higher, while the “high” and “low” shares are slightly smaller.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

10. Expected turnover 2017 (compared to 2016)
For 2017 a majority of 59% of the participating affiliates expect an increase in turnover. Only 8% expect their affiliates’ turnover being lower than in 2016.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

11. Expected number of employees in 2017 (compared to 2016)
Only 7% of the affiliates are planning to reduce staff, whereas 36% expect an increase in headcount.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

12. Changes to the preceding survey (June 2016)
In order to compare the results to those of the preceding survey, we use the balances of the positive and negative shares in the participants’ answers to the questions.
Current business situation: balance is now 18 percentage points, which is an increase by 9 pp from the preceding survey (9 pp).
Current capacity utilization: balance up 5 pp to 15 pp now.
Expected turnover: balance up 26 pp to 51 pp now.
Expected number of employees: balance up 8 pp to 29 pp now.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

13. Main implications
Business climate according to survey participants has improved significantly in comparison with the preceding survey
Especially, expectations for the near future quite optimistic now
Increase in business climate is clearer than expected by VDMA economists
In some mechanical engineering sectors more optimism is certainly justified due to the impulses from the investment and consumption side described on the first pages
Nevertheless, results should still be interpreted with caution due to short track record of the survey
VDMA Business Climate Survey China November 2016
Photo: Nonwarit - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

14. Participating companies benefit more.
The purpose of the survey is to make use of the insights of executives working in China.
Therefore, all VDMA member companies that have subsidiaries/affiliates in China can take part through their local executives.
Through their active participation in the survey participants help us to
ensure a high degree of validity of the statistical figures and
provide specific analyses for various kinds of mechanical engineering products/services as well as customer industries
Participating companies benefit more.
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017

15. Benefit from participation
A more comprehensive edition of this report („participants‘ edition“) is sent out to all Chinese affiliates that take part in the survey.
That edition features additional analyses concerning
Origin of expected turnover – with customers located in China vs. outside China
Impact of economic drivers consumption and investment on customer industries
Impact of economic drivers consumption and investment on mechanical engineering industry
Please refer directly to your company‘s Chinese affiliate in order to get that report or find out whether or not the affiliate participates in the survey.
VDMA Business Climate Survey China November 2016
Photo: everythingpossible - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

16. How to participate The survey is conducted twice a year.
All data collected is treated confidentially and results are reported in aggregated form only.
Invitations featuring a link to the web survey platform are sent out via .
For any questions, please contact
Daniel Yoo
Phone:
VDMA Business Climate Survey China November 2016
Photo: pressmaster - Fotolia
| Richard Hinz, Daniel Yoo
Jan. 2017

17. Your contact. Daniel Yoo Chief Representative
VDMA China – Shanghai Representative Office
Phone:
Richard Hinz
Economist
VDMA Economic and Statistic Affairs
Phone:
VDMA Business Climate Survey China November 2016
| Richard Hinz, Daniel Yoo
Jan. 2017