2017 APEC CEO Survey China Report

Chinese firms seek growth through trade.

More than 200 CEO’s in China and Hong Kong were interviewed on the theme of A World in Transition. Executives share with us their business confidence levels, their perception of trade trends, how businesses are organising themselves, their operational challenges, and their outlook and expectations of new trade orientations.

Key findings of the China report:

  • Survey revealed that 23% of executives in China think that significant progress has been made towards free trade across the Asia Pacific region in the last 12 months, up from 15% in 2016. Moreover, 33% of the executives surveyed in China believe that revenue opportunities will increase in the next 12 months due to new trade agreements, compared to 27% of APEC respondents.
  • China’s role in APEC is going to get more prominent as opportunities for exports and fixed asset investments emerge from the BRI initiatives. Given this outlook, not only do executives in China expect APEC to play a larger role in facilitating economic growth and cooperation for the region, accelerating economic integration of micro, small and medium enterprises (MSMEs) (33%) and facilitating labour mobility (26%) are priorities identified by executives in China.
    Survey found that 39% of the executives in China are “very confident” about their company’s prospects for revenue growth in the next 12 months compared to 24% who reported the same in 2016 .
  • In terms of digital transformation, survey shows that the percentage of executives in China “automating certain functions in their organisation” will increase from 64% today to 83% in three years.
  • In terms of emerging technology impacting the workforce, about 51% of executives in China reported that they expect to move to new structures of employment including more ‘gig’ talent and outsourced labour in three years compared to 31% of the executives today.

 

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China Economic Quarterly November 2017

Overall 2017 economy likely to outperform market expectations, despite moderately slower growth in third quarter.

This latest issue of China Economic Quarterly, which provides analysis of major economic data points in China for Q3 2017, summarises main policy developments and discusses hot topics of interest. In the third quarter, China’s GDP growth slowed slightly as expected to 6.8%, partly due to the government’s efforts to rein in property investment and debt risks.

Here are some highlights of the macro economic and policy updates:

  • The economic growth rate in 2017 is likely to demonstrate a better performance than that of 2016 and beat the market expectation of 6.7% thanks to the strong contribution from the service sectors.
  • The International Monetary Fund (IMF) has upgraded its economic forecast for China to 6.8% and 6.5% for 2017 and 2018 respectively. This is the fourth time this year that the IMF has upgraded China’s economic forecast.
  • As the national and local governments step up their restrictive policies to further curb speculation, property sales might decrease in the fourth quarter and next year.
  • China’s imports and exports had the best performance amongst all major economic indicators, thanks to the moderate recovery of global economy and fairly strong domestic demand.
  • China will step up efforts to protect the legal rights and interests of entrepreneurs, strengthen protection of intellectual property rights (IPR), fight against monopolies, unfair competition practices and regional protectionism, and remove regulations that undermine fair competition.

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To read more, you can access the latest issue of China Economic Quarterly by clicking the following links:

China:           www.pwccn.com/ceq
Hong Kong:  www.pwchk.com/ceq

China’s new leadership rolls out new blueprint for future development

The 19th National Congress of the Communist Party of China which recently concluded (18-24 Oct) in Beijing has proven to be a landmark event. The Party transferred power to a new Political Bureau Standing Committee and fortified guiding theory by adding: the “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era”.

The 19th Party Congress laid out clear visions, principles and a roadmap for China’s development over the coming 30 years. The journey towards building China into a “great modern socialist country” by 2049 will lead to profound impacts on China’s economic and social development in the next three decades, and concurrently, will generate significant repercussions that will resonate around the world.

Consequently, PwC has developed an in-depth review of the Party’s policy roadmap along with its impacts for potential investors and corporations operating in China. Details are provided on the following important topics:

• The economy
• Financial risk and bad debt
• RMB and monetary policy
• SOE reform
• Private entrepreneurship
• Foreign investment in China and China’s outbound investment

The business review also highlights three particular bright spots for future investment:

  • Technology and innovation
  • Improving people’s wellbeing
  • Green development/environmental protection.

To find out more, please see below the full business review of China’s 19th Party Congress.

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China Economic and Policy Updates Q2 2017

Here are some highlights of the macro economic and policy updates:

  • Services and consumption continued to be notable drivers of economic growth while fixed asset investment growth continued to decline.
  • The International Monetary Fund (IMF) has upgraded its economic forecast for China to 6.7% and 6.4% for 2017 and 2018 respectively. This is the third time this year that the IMF has upgraded China’s economic forecast.
  • Chinese regulators have expressed concerns about overseas acquisitions by Chinese firms in certain sectors, underlining the government’s new drive to rein in offshore spending by some of the country’s biggest companies.
  • China’s ballooning debt, while a concern, is primarily domestic in nature. Yet, it is unlikely to lead to a financial crisis as the Chinese government has significant fiscal buffer to keep things under control.

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To read more of our latest articles from China Economic Quarterly:

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Repaving the ancient Silk Routes

China’s Belt and Road (B&R) initiative is a global connectivity program focused on infrastructure development across East and Central Asia, the subcontinent, Africa and Europe. It goes beyond roads and ports, to include airports, power plants, pipelines, waste and water management facilities and telecommunications. These are supported by extensive ecosystems, providing opportunities for international professional and project management expertise.

Demand for global expertise

B&R projects are open to all countries beyond the 65 developing nations along the 6 economic corridors. It will have an impact on a population of about 4.4 billion and one third of the global economy. The size and complexity of B&R projects means that enterprises from both China and along the B&R will seek to partner with foreign companies which have globally recognized skills and capabilities, as well as experience in managing complex international engagements.

However, identifying the right B&R project and preparing for success raises a number of complex questions:

What are the risks associated with B&R projects?

  • Geopolitical risks: Changes in political regimes or in bilateral relations between countries involved in B&R during a project’s lifespan.
  • Funding risks: Funding gaps and host countries’ varied ability to repay loans, exacerbated by higher capital and debt service ratios of B&R projects.
  • Operational risks: A lack of experience in delivering and managing complex transnational projects, leading to delays and cost overruns.

How do I evaluate which B&R project to be involved in?

  • Commercial viability assessment: Conduct realistic economic modelling to establish the business case viability of a B&R project.
  • Review maturity of the infrastructure ecosystem: Assess the maturity and future plans of the surrounding infrastructure.
  • Establish a portfolio fit: Evaluate how the proposed B&R project complements the company’s existing infrastructure portfolio and overall growth objectives.

Which factors will help me position for success?

  • Contingency strategies: Establish contingency plans to manage short term disruptions and plan for lengthy project lifespans.
  • Align with governments: Build strong and respected relationships with local authorities and align with national interests in order to effectively navigate political pressure points.
  • Establish trusted partnerships: Work with local companies with proven track records and established connections with key local stakeholders.
  • Adopt a risk-sharing approach: Establish trust among all stakeholders to dilute the burden of shouldering potential risks.

 


Contact:

Felix Sutter
Assurance Partner
Tel. +41 58 792 2820
felix.sutter@ch.pwc.com
https://ch.linkedin.com/in/felixsutter/de

China Economic Quarterly May 2017

What to expect from Made in China 2025 and China’s first Belt and Road Forum

The China Economic Quarterly is a market outlook prepared on a quarterly basis by PwC to share the latest economic and policy updates. In this third quarter update, the overview of China’s macro trends are followed by a summary of the main policy developments and hot topics of interest such as policy updates for a new economic zone Xiong’an New Area, insights into the “Made in China 2025” initiative and the Belt and Road Forum for International Cooperation to be held in Beijing on 14 and 15 May 2017.

China’s economic growth in the first quarter of 2017 delivered a much better result than market expectations. GDP increased by 6.9% year-on-year – the highest growth over the past five quarters, thanks to more pro-active fiscal stimuli and continued expansionary monetary policies.

Here are some highlights of the report:

  • The primary, secondary and tertiary (services) industries all grew, with services as a share of GDP reaching a new high of 56.6% and contributing 61.7% to overall economic growth.
  • In the first quarter of 2017, China maintained its expansionary monetary policy. The increments of Aggregate Financing to the Real Economy (AFRE) were RMB 6.93 trillion, which was RMB 226.8 billion more than the same period last year.
  • In a bid to address severe traffic congestion and air pollution in Beijing, the Chinese government announced a historic plan on 1 April 2017 to create Xiong’an New Area, a new economic zone about 100 km southwest of Beijing, with an initial area of around 100 square km and eventually expanding to nearly three times the size of New York City.
  • “Made in China 2025” is China’s first ten-year plan for manufacturing expansion and upgrading and has attracted criticisms for being “problematic” with the potential to be used to “discriminate against foreign firms in favour of Chinese competitors”.

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china_economic_quarterly_nov2016To read more, you can access the latest issue of China Economic Quarterly by clicking the following links:

China:           www.pwccn.com/ceq
Hong Kong:  www.pwchk.com/ceq

 

Prospects for Future Economic Cooperation between China and Belt & Road Countries

The Belt and Road Forum for International Cooperation (BRF) was held in Beijing from 14 to 15 May 2017. According to China’s Ministry of Foreign Affairs, 29 heads of states and governments attended the highest level of international conference held by China since the major initiative was put forward by President Xi Jinping in 2013. Economic cooperation is expected to be the top priority of this forum. So which areas are likely to achieve breakthroughs?

In our latest PwC analysis on the B&R initiative, Prospects for Future Economic Cooperation between China and Belt and Road Countries, we look at how the B&R initiative is reshaping the future economic cooperation between China and B&R countries.

Here are the major future prospects for economic collaboration between China and B&R countries:

  • Signing free trade agreements may be the most effective way for China to expand its trade with B&R countries
  • Opening up stock and bond markets for B&R countries will provide more investment opportunities for Chinese business
  • Promoting RMB internationalisation in major B&R economies rather than in the developed countries is more likely to be successful
  • Domestic preferential policy support will be critical in encouraging Chinese companies to invest more in the B&R countries

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China comes to Weggis – PwC experts on site

China Firm Roadshow

Many Swiss companies have a business presence in the China market – are you one of them? Our PwC colleagues from the People’s Republic of China will present their views and analyses on the general business environment, changes in the tax regime and transaction trends.

China is going digital at a faster speed than most countries, and many foreign
companies use digital channels to approach their customers in China. China’s new Cyber Security Law will have far-reaching consequences for any company that has operations in China, foreign companies included. Our experts will highlight the key regulatory and tax-related changes that may affect your company as well.

Chinese investors have become increasingly present in Switzerland. In the concluding panel of this PwC event, experts from different industries will discuss the burning questions such as what Chinese investors are looking for in Europe, how they will manage the newly acquired companies, and what possible implications there are for Swiss businesses.

We would like to discuss these topical issues with you in a one-to-one meeting and on our China Weggis Event.

Dates

China Weggis Event: Wednesday, 31 May 2017

One-to-one meetings: 29 – 31 May 2017

Click here for more details

Registration

Please register online for the event and the one-to-one meetings:

Online registration

Contact

Felix Sutter 
Head Asia Business Group
SCCC President
Partner PwC
+41 58 792 2820
felix.sutter@ch.pwc.com

Stefan Räbsamen
Partner PwC
+41 58 792 2622
stefan.raebsamen@ch.pwc.com

 

Business Review of Premier Li Keqiang’s Government Work Report 2017

March 2017

China recently held the 12th National People’s Congress in Beijing. Premier Li Keqiang announced a number of key policies and initiatives which sets the country’s economic direction. These changes will have profound implications on the business landscape in 2017 and beyond. As part of the Congress, Chinese Premier Li Keqiang delivered the Government Work Report which provides a review of:

I.   Government’s achievements in 2016;
II.  Government’s goals and priorities for 2017; and
III. Government’s plans and actions to improve quality and effectiveness of growth.

Key highlights of the Report

Economic growth rate

  • GDP growth rate for the coming year has been set realistically at “around 6.5%, or higher if possible in practice,” relative to the range of 6.5-7% for 2016.

Fixed and private investments

  • The government will invest 800 billion yuan in railway construction and 1.8 trillion yuan in highway and waterway projects in 2017 while continuing its massive investments in major state projects.
  • To encourage growth in private investments, the government plans to improve policies as well as public administration and promote Public Private Partnerships.

Emerging industries and investment hot-spots

  • The government plans to accelerate the R&D and commercialisation of new materials, artificial intelligence, integrated circuits, and bio-pharmacy and 5-G mobile communications.
  • The government has also set aggressive targets for environmental protection and plans to launch extensive ‘Fitness-for-All’ initiatives, creating business opportunities in education, elderly care, healthcare, tourism, e-commerce and creative services.

Pro-business reforms

  • The government plans to make service industries, manufacturing, and mining more open to foreign-invested firms (FIEs).
  • There are also plans to treat FIEs the same as domestic firms on applications, standards-setting and government procurement and allowing FIEs to enjoy the same preferential policies under the Made in China 2025 initiative.

Real estate sector

  • In 2017, the government will establish robust long-term mechanisms to promote steady and sound development of the real estate sector to restrict further investment and “speculative” purchases by residents and investors.

RMB exchange rate and bad debt

  • To address the rising non-performing loans, Premier Li has pledged to reform the financial regulatory system and work systematically to defuse major potential risks.

Asia: digitally diverse, economically attractive

Digitisation is in full swing in Asia, and is having an impact on both business and society. But the picture is mixed: while Asian countries are setting the trend and the pace in some areas, they need to catch up in others. As a leader in innovation and engineering, Switzerland will continue to play a key role in the economic and geocultural exchange with Asia.

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