Asia in focus: Insights from AlixPartners’ 19th Annual Turnaround and Transformation Survey

The economic picture in Asia is markedly different to that of the rest of the world, given the absence of the spike in inflation and related interest rate rises witnessed elsewhere. These differences have limited the need for restructuring as fewer companies have been driven into distress from such financial pressures.

This environment will go some way to explaining the points of optimism amongst respondents to our Asia Turnaround and Transformation Survey this year, noting their expectations of an upward trajectory for corporate profitability. The U.S. and E.U. regions have largely avoided any periods of recession and in Asia, Japan has demonstrated improved economic performance recently.

However, I do see a bifurcation in this part of the world mainly due to China. In the world’s second largest economy, there is a major contradiction as steady economic growth coexists with much lower consumer confidence. This contradiction is widely viewed as being due to the ongoing distress in the property sector, which has impacted the personal wealth of many consumers but shows no signs of being resolved quickly.

At a more macro level, geopolitics continues to create challenges for manufacturing organizations with export-oriented business strategies. Many global customers continue to de-risk by shifting volumes from China into other countries, which creates stress as companies struggle with under-utilized capacity.

I also note an air of increased caution amongst banks, too, as they dial back activity with many customers who may be considered a higher risk. This retreat could present significant funding gaps to be filled, and therefore a scenario where private credit takes this opportunity to play a more sizeable role than we have traditionally seen in part of the world.

Thanks to the upcoming U.S. elections, geopolitics is more likely than pure economics to be the driver of market developments in the coming year. A change in political direction in November could increase friction regarding global trade and tariffs, driving higher levels of distress as a result.

This risk is beyond the control of those in Asia but creates a level of uncertainty that makes the careful management of cash an imperative for businesses at this time. As the saying goes, “cash is king”, and in the current environment I couldn’t agree more.

I hope you find the findings of our study informative, which you can download here and also explore in more detail directly below, and we welcome further discussion with you on any of the themes raised within this year’s report.