More CEOs in China are optimistic about global growth in the next 12 months than their global counterparts, according to PwC's recent 22nd Annual Global CEO Survey China Report entitled ‘Amidst ever present challenges, opportunities remain to create business and economic value’.
Altogether, 73% of CEOs in mainland China believe that global economic growth will improve, compared to 41% of CEOs in Hong Kong and 42% globally. This is the only economy among the major territories surveyed which was more optimistic this year than the last.
CEOs in China are confident of revenue growth despite global economic slowdown. Over one-third (35%) of mainland Chinese business leaders feel “very confident” in their company’s prospects for revenue growth over the next 12 months. A higher proportion (47%) are confident about their company’s growth prospects over the next 3 years. “Chinese mainland executives have expressed confidence in revenue growth.
They are likely downplaying fears, to maintain stability and confidence, as a way to cushion the direct impact of the trade dispute. In 2018 at the 40th anniversary of its opening up, China announced further market liberalisation measures to encourage investment in innovation, science and technology, as well as tax cuts to drive the private sector and small businesses. We expect these measures can further drive enterprises’ transformation and technology innovation in the next three years, and it can better match the optimistic expectations of Chinese executives for the next three years,” said Frank Lyn, PwC China and Hong Kong Markets Leader.
When asked about the biggest economic, policy, social, and environmental threats to organisations’ growth prospects this year, trade conflict was the primary concern for 78% of the Chinese CEOs surveyed, followed by policy uncertainty and geopolitical uncertainty (73%), and protectionism (72%). As a response to the trade conflict, many mainland Chinese CEOs are adjusting their supply chain and sourcing strategy (70%) and shifting their growth strategy (52%) as well as production (40%) to alternate territories.
The impact of trade conflict has prompted Chinese CEOs to become less reliant on the US and instead look for growth opportunities elsewhere. For mainland Chinese CEOs that have invested abroad in the past and will continue to do so, or those hoping to start in the future, the top three geographic regions that are a priority for outbound investments are Belt and Road countries (59%), Asia Pacific (56%) and the European Union (47%).
In terms of the ranking of attractiveness of countries as being most important to their organisation’s overall growth prospects over the next 12 months, for mainland Chinese CEOs, Australia was ranked first this year, while the US dropped to second place from top position in 2018, followed by Japan. Chinese executives show strong confidence in data usage and analytics.
When assessing their organisation’s ability to make decisions based on data and analytics, 56% (Global: 38%) consider themselves “somewhat ahead” of the game. PwC believes that the conduciveness of China's domestic business environment to data usage together with data infrastructure have put Chinese firms ahead of the competition.
When asked about the impact of the lack of availability of key skills on organisational growth prospects, Chinese executives reported a wide range of challenges including the inability to innovate effectively (53%), impact on quality standards and/or customer experience (52%), as well as a higher than expected rise in people costs (50%) which would understandably weigh on business competitiveness. In response to the capability gap, significant retraining or upskilling of the existing workforce (53%) is seen as the main lever for Chinese business leaders to narrow if not close the skills gaps.
Chinese executives are strong believers in AI and see the government’s involvement in the space as instrumental. The vast majority of Chinese executives (92%) are of the view that the adoption of AI will significantly change the way they do business in the next five years. Regarding government involvement, 85% of Chinese executives affirm that government should play a critical and integral role in AI development.
“To address the uncertainties in trade conflict, policy and economic growth, Chinese enterprises are looking for new growth opportunities and are responding by adjusting supply chains and sourcing strategies. They are investing in innovative technologies including data analytics and AI to improve competitiveness, and address the changing market environment,” said Frank Lyn.