Innovation: a key growth driver for China’s CEOs

Innovation: a key growth driver for China’s CEOs

With the global economy starting to show signs of recovery, CEOs around the world are focusing further on growth. Yet, for China’s CEOs, who have been in growth mode for much of the last three decades, the question top of mind is, “How can growth be sustained?”

The findings from our 17th Annual Global CEO Survey -The view from China show that China’s CEOs are confident about future growth, but they also recognise the challenges that come with a maturing domestic economy.

Tax burdens, rising labour costs and regulation are key concerns. Some of the longer term trends that Chinese CEO’s believe will transform their businesses are similar to their global peers in technological advances and the shift in global economic power but others reflect the more China centric factors of continuing urbanisation and domestic economic reform.

“The pace of change in China continues to be astonishing. Last week, we saw the World Bank revising global estimates which could see China as the world’s largest economy in 2014,” PwC Partner and China Markets Leader Colum Rice says.

“The opportunities for Chinese CEOs are in sharp contrast to their peers overseas, with a stronger focus on domestic growth opportunities and a much greater drive into product and service innovation.

“Given the scale of the opportunities in China, it is not at all surprising that they have a greater domestic focus. Although at the same time, China invested US$90 billion offshore in 2013, making it both the number one destination for inbound investment and the third largest overseas investor. Further growth in Chinese outbound investment is to be expected.

“We have certainly seen some of the benefits of these capital flows with major Chinese inbound investment to New Zealand in the last year. Looking at the underlying drivers of change in China you can see that the opportunities will continue to grow for us.

“In 2012, China's urban population outnumbered its rural population for the first time and this year, the services sector has overtaken the industrial sector for the first time.

“The Chinese Government has invested in infrastructure which is helping to open up economic opportunities for the 44% of China’s GDP that is away from the eastern seaboard. Economic reform is being undertaken at the same time, such as the Shanghai Pilot Free Trade Zone, which is starting to tackle the regulatory burden.

“All of this should contribute to the continuing development of a more open and efficient Chinese economy. This is great news for New Zealand companies, with the appetite and ambition to continue growth in trade and investment with our largest trading partner,” concludes Mr Rice.

In China, 47% of CEOs are 'very confident' about their company's growth prospects. In addition, 33% of global CEOs rank China as their top growth market in the next 12 months. New Zealand CEOs identified China as the second country they’re looking to for growth in the next 12 months with 46%, just behind Australia on 49%.

Compared to their global peers, China's CEOs are the least likely to be looking for new geographic markets for growth, 5% compared to the global average of 14%, and are clearly focused on the domestic market. In sharp contrast, 57 %of New Zealand CEOs see growth across the Asia Pacific economies as an opportunity to grow their business.

Innovation is a particularly strong theme. China's CEOs see their best prospects in new product or services innovations - 52% compared to the global average of 35%. When CEOs were asked about the type of change programme they were most likely to have completed or have underway, the most common response (38%) from China's CEOs was related to R&D and innovation capacity, higher than the global average of 27%.

When asked to look five years into the future, China's CEOs identified three major trends that will transform their business. More than 80% of China's CEOs identified technological advances as a major trend, 62% identified urbanisation and 55% identified the shift in global economic power.

To access the Annual Global CEO Survey findings visit: www.pwc.com/ceosurvey
To access the New Zealand supplement visit: www.pwc.co.nz/ceosurvey

The 17th Annual Global CEO Survey was released at the World Economic Forum held in Davos, Switzerland on 21 January 2014. It provides an insight into the thinking of some of the world’s most prominent business leaders. The global survey results are based on the responses from 1,344 CEOs from 68 countries between September and December last year.

Forty-six New Zealand CEOs contributed to the survey; including 35 online survey responses and 11 in-depth face-to-face interviews. Three of our online survey respondents also participated in an in-depth interview; as such, the total number of interviews doesn’t equal to 46. These interviewed New Zealand CEOs lead companies with a combined annual revenue of approximately NZ$39.5 billion, employing around 65,000 people, across a diverse range of industries. These results have been collated to produce the New Zealand supplement.

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