The new International Business Survey, released today by HSBC’s Commercial Banking division, found that US mid-sized companies, much like their large-cap brethren, are increasingly pinning their growth plans on markets overseas even as the US economic recovery slowly takes hold. The US component of the survey, conducted for the third year, polled nearly 650 US senior financial executives from companies with annual sales between US$20m and US$5bn, a critical segment of the US economy accounting for nearly US$8.2 trillion in annual sales.
The survey found that the portion of US executives planning to increase their overseas sales targets rose sharply to a survey high of 72%, up from 49% in 2008 and 56% in 2009, underscoring the rapid globalisation of the core of the US economy. Fifty-six per cent of the executives polled say their overseas sales are growing faster than domestic sales, a rebound from 52% last year though still below the 67% level seen in 2008.
Surprisingly, respondents indicated the most attractive countries for US companies to do business with currently are Canada and the UK, which surpassed some of the US’s largest trading partners, including China, Germany and Japan. Forty-five per cent of respondents cited Canada and 38% the UK as their top market for cross-border business; outpacing other dynamic emerging markets like India and Brazil.
However, when it comes to long-term prospects, China still carries the day. Forty-five per cent of respondents chose China as the country with the greatest growth potential for US mid-sized businesses. India and Canada were in a statistical tie, polling 27% and 26% respectively. In 2008 and 2009, the markets that offered the greatest growth potential were China, India and Brazil.
As the economy shows signs of life, more mid-sized businesses are investing in growth initiatives to maintain their competitive edge, rather than cutting costs and taking measures to brace for a downturn. This year, less than one-third of respondents (30%) indicated that they are reducing the number of employees at their companies, down from the nearly half (49%) of respondents that reported staff reductions in the previous year.
“The survey findings validate the untold story of the US economy that we see every day; mid-sized businesses at the heart of the US economy are increasingly adding cross-border trade to their growth plans,” said Christopher P. Davies, senior executive vice president and head of commercial banking for HSBC – North America. “But the fact that many businesses currently find the greatest opportunities in established markets like Canada and the UK suggests that the challenges to tapping high-growth emerging markets remain high.”
Perceived risks hindering businesses’ interest to engage in international business include legal complexities and local regulations (49%); complexity of certain international markets (42%); and sovereign (country) risks (29%).
Although the survey underscores renewed confidence among US businesses, respondents still expressed some caution, which is evident in their reluctance to take on new debt. A surprising 60% of respondents stated that they have not applied for an increase in their credit line or for a new line of credit in the past 12 months.
For the first time, HSBC Commercial Banking also interviewed over 3,600 mid-size companies in 10 additional markets, such as Hong Kong, India, mainland China and Brazil, to gauge their cross-border business activities. These global findings revealed that non-US businesses overwhelmingly identified the US as the top market in which to conduct international business (44%), followed by mainland China (26%).
Davies added: “Despite the perceived risks to expanding internationally, we think that business will become increasingly global. All 10 markets surveyed not only reported that the pace for international growth was faster than their domestic business activity in the past 12 months, but will continue to trend upward in the next two years.”
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