The forces of globalisation took a new turn in the last year. While prevalence of digital technologies continued to blur geographic boundaries, domestic distractions made western economic giants, such as the US and the European Union (EU), increase border control and review their global commitments. This, along with other aggressive strategies such as Belt and Road initiative, has advanced China’s influence in the global arena. However, China still lags behind the US as the most attractive market for growth prospects. It was during this transition in the world order that PwC conducted its 21st Annual CEO Survey to gauge the sentiments of executives all over the world.
The survey was built around the themes of Trade and Globalisation, Trust and Tenure, and Technology and Talent. We interviewed about 195 executives based in Mainland China and Hong Kong across a range of industries.
The world economy has been witnessing its best run and fastest growth since being hit by recession in 2010 while domestically, China is shifting focus from being export and investment led to consumer spending, innovation and services driven.
PwC’s 21st CEO Survey results found that 69% of executives in China believe that global economic growth will improve over the next 12 months compared to 31% who had a similar outlook for global growth in the last two years. The proportion of executives in China who are “very confident” about their revenue growth prospects in the next 12 months has also risen to 38% compared to 33% in 2016.
In the ranking of the US and China as being attractive markets for growth, a noteworthy point is that the trend shows that the attractiveness of the US as the top destination is rising while the attractiveness of China is stable.
In a world that is reconfiguring, in terms of political and economic viewpoints, it appears that executives in China (as well as globally) believe that the world is moving towards fragmentation, regional trading blocs and open access to internet, yet there is recognition of common ground in global belief and value systems.
While businesses confidence is high, executives in China shared their views on diverse business and political concerns.
On the business side, the top threats identified by 90% of the executives in China were cyber threats, speed of technological changes, availability of key skills and changing consumer behaviour. In terms of top economic, policy, social and environmental threats to organisation’s growth prospects in China, over-regulation, geopolitical uncertainty and social instability were cited.
In order to drive corporate growth/profitability in the complex business environment, 64% of executives in China cited new strategic alliance or joint venture as a top strategy for the next 12 months. In terms of investment strategies, 89% of Mainland China executives are anchoring their investment strategy to Beijing-Tianjin-Hebei City Cluster, Belt and Road Initiative (BRI) and Greater Bay Area.
It is worth noting that there has been a sizeable increase in the proportion of CEOs in China who are looking to drive corporate growth and profitability (up 19 percentage points from a year ago) through the use of outsourcing and by collaborating with entrepreneurs and start-ups (which has risen from 26% in 2017 to 45% in 2018).
The issue of trust is complicated by the varying degree of business pressures that CEOs in China are facing driven by differences in stakeholder expectations. Results show that companies are recognising that driving shareholder value is no longer enough and that responsible business practices are essential as a license to operate.
About 35% of the executives surveyed in China believe that the trust between the workforce and their senior leadership is declining. 34% of the executives surveyed in China ‘agree’ or ‘strongly agree’ that they are experiencing declining trust from their customers.
Making a concerted effort to build and sustain trust with employees and workers is imperative and companies are realising that trust could be a differentiating capability, no less than talent and technology. Survey results show that organisations are building trust with their workforce by creating transparency around their people strategy (62%), employee’s contribution to the overall business (58%), and diversity and inclusion and organisations’ values (57%). Promoting diversity and inclusion (54%), and investing heavily in cyber security (51%) were identified as the top two strategies in China for organisations to build trust with customers.
As China shifts to an innovative, technology driven economic growth, skill development that keeps pace with technological development is vital.
Given the optimistic growth prospects worldwide and in China, survey found that 70% of the executives in China expect the headcount at their organisations to increase over the next 12 months while a high proportion of executives surveyed (92%) are concerned about availability of digital skills in their industry.
In order to address the skills gap, survey found that a higher proportion of businesses in China (84%), compared to the global average of 67%, are working towards retraining and skill development of the workforce impacted by automation. Other measures such as improving compensation and benefit packages (57%) and modernising the work environment (36%) were identified as top strategies to attract digital talent.