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Deloitte CFO survey shows that trade tensions temper corporate optimism for 2019

The latest edition of Deloitte's survey of Chief Financial Officers (CFOs) at Chinese firms reveals a sharp drop in sentiment.

According to the 2018 Q3 survey, 82 percent of the CFOs are less optimistic about economic prospects than they were six months ago--a 52 percentage point increase from six months earlier--with rising trade protectionism seen as biggest risk. As far as their own businesses are concerned, more than half the CFOs surveyed (56 percent) say they have already been hit by trade tariffs, and only 38% expect to meet their revenue targets.

"There has been a sharp shift in sentiment," says William Chou, National Managing Partner of Deloitte China CFO Program. "The bright spots of six months ago, including several economies that were doing better than expected, have faded. It's no surprise sentiment among Chinese CFOs has declined given goods flow between China and the US have borne the brunt of trade measures."

The ongoing trade war and the prospect of economic turmoil (27 percent of respondents cited this as the second biggest area of concern) have even managed to put technology to the back of Chinese CFOs' minds. Not one of the surveyed CFOs views disruptive technologies as a concern, down from 10 percent in Deloitte's Q1 survey.

"With no immediate agreement for tariffs, Chinese stock markets struggling, and the prospect of pressure from government policies, it looks like CFOs are right to be negative. However, China and the U.S. are striving to resolve their trade issues. If they can eventually reach an agreement, business sentiment will quickly improve," adds Chou.

The survey brings brighter news for economies in Southeast Asia, which was picked by 53 percent of CFOs as the country or region best placed to benefit from Sino-US trade tensions.

"Trade tensions between the US and China aren't going to do either of them much good," says Jens Ewert, Deloitte China CFO Program MNC Sector Leader. "With 58 percent of respondents saying China is going to see the biggest drop in export volume, and 28 percent picking the US, it's hard to avoid the conclusion that the ongoing trade tussle is a lose-lose situation for the two main protagonists."

As one of the key initiatives of Deloitte China CFO Program, the Deloitte China CFO Survey is conducted every six months as a temperature check of business and economic sentiment and a source of insights on burning business issues and challenges. The latest survey was conducted between September and November this year, with 108 responses from senior corporate executives.