Chinese enterprises’ confidence rises, looking for growth through overseas expansion, transformation and innovation

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PwC reveals 2017 APEC CEO Survey China report

Hong Kong, 28 Nov 2017  - PwC’s 2017 APEC CEO Survey China report revealed that 39% of the executives in China are “very confident” about their company’s prospects for revenue growth in the next 12 months. There is a sizeable increase in the proportion of executives in China who are “very confident” this year  compared to 24%,  who reported the same in 2016  and also slightly higher than 37% of overall APEC respondents who shared the same sentiment). To drive their growth strategy, 81% of executives in China were “just as confident” or “more confident” about launching a new product or service or entering a new line of business.

PwC surveyed over 1,400 CEOs and business leaders across APEC’s 21 economies (including 202 based in China and Hong Kong). Respondents were asked to give their perspectives and plans for doing business in China in the run up to the APEC Business Summit in Da Nang, Vietnam (8-10 November).

China’s role in APEC is going to get more prominent as opportunities for exports and fixed asset investments emerge from the Belt-and-Road initiatives. 70% of  China respondents to direct their global investment in the coming year to APEC. Executives surveyed in other APEC economies also have similar investment intent (71% to invest in APEC and 29% in rest of the world) indicating a strong regional investment sentiment. Moreover, 75% of the executives surveyed in Hong Kong are inclined to make their new investments in APEC as compared to 65% of their mainland counterparts.

In order to capitalise on new opportunities, 57% of executives in China consider developing new products and services for existing markets in China as a top strategy for their organisation to undertake over the next three years. The survey also shows that the percentage of executives in China “automating certain functions in their organisation” will increase from 64% today to 83% in three years (APEC: 58% today vs 72% in three years). Currently, 49% of executives in China (APEC: 40%) are “investing in machine learning and emerging technologies” and in the next three years, that proportion will rise to 74% (APEC: 66%).

“The Belt-and-Road initiatives could bring enormous opportunities to Chinese enterprises. While they focus on increasing market share, services value-addition and leveraging China’s agenda for globalisation to both domestic and external advantages, they should also find a way to tackle domestic challenges such as over-capacity, debt, and declining productivity,” says PwC Asia Pacific Chairman Raymund Chao. “Technology enabled transformations is leading to growth for companies in China. The implication of this is that demand for tech talent – engineers, data scientists etc. – is increasing at a fast pace. Instead of thinking about jobs lost to automation, companies should be actively investing in workers so that jobs are gained from automation.”

Although a majority of respondents are confident about expanding operations in Asia Pacific economies (74%) and increasing profit margins in domestic operations (69%), there was a decline in proportion of executives in China feeling “very confident” about forecasting compliance costs and tax liabilities, which had fallen considerably from 22% in 2014 to 13% in 2017. Similarly, there has been a decline in proportion of executives in China feeling “very confident” in increasing profit margins in international operations which fell from 43% in 2014 to 19% in 2017, which might reflect policy and regulatory unpredictability, currency risk, trade barriers and operational constraints as factors worrying companies.

PwC China and Hong Kong Markets Leader Frank Lyn says, “In terms of China’s increased engagement in APEC economies, beyond challenging industry leaders they might influence new rules of engagement in key public policy areas such  as innovation policy, data privacy, cybersecurity, food supply to waste management in APEC economies.. Whether the digital transformations/innovations are transformative or disruptive is the responsibility of many stakeholders such as business leaders, regulators and governments to manage risks through appropriate governance frameworks.” 

 

 

Notes

  1. For a full report, go to www.pwc.com/apec
  2. “China and Hong Kong executives” refer to respondents who have chosen China and Hong Kong as their principal economies in the survey
  3. PwC interviewed 1,412 CEOs and industry leaders across the 21 APEC economies during May to July 2017.

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