Despite the anticipated business growth, only 20% of respondents expect an increase of their profit margins while 30% even forecast a decrease, mainly due to increased costs of raw materials and intensifying competition leading to price wars.
Coface forecasts that there will be a mild credit crunch in 2008. Coface believes that due to better financial shape of the companies and larger contributions of emerging countries to the world economy, the credit crunch of 2008 will be less severe than that in 2001. In 2001, payment defaults jumped 30% just before the economic bubble burst, with the US suffering from economic recession and world economic growth under 2%.
The top three factors the respondents anticipate will have significant impacts on their business growth are macroeconomic controls by the Chinese government (40% of respondents), quotas and anti-dumping taxes imposed by overseas countries (19%), and the sub-prime mortgage crisis in the US (11%). These impacts are already apparent in the gradually lengthening payment delays since the first quarter of 2007 observed by Coface. When local enterprises seek business opportunities in emerging markets, South East Asia comes on top of the list. However, local enterprises also rank South East Asia second among markets with the highest trading risks.
Xavier Farcot, Deputy Regional Managing Director - Greater China, Coface, told that the contribution of emerging countries to world GDP is markedly higher today, up from 24% in 2001 to an anticipated 34% this year. But Farcot still warns that the good performance of emerging countries should not obscure risks of speculative bubbles or business environment weaknesses.
