Business leaders are bullish onurbanization, innovation, R&D

Faith in China's economy, the world's second largest, is increasing and about half the country's chief executive officers are "very confident" in their company's prospects over the next 12 months, a survey showed. Globally, 33 percent of CEOs rank China as their top market for expansion in the period.

PwC's 17th Annual Global CEO Survey polled 1,344 corporate heads in 68 countries from October through December, including 66 from the Chinese mainland. It showed that compared with the previous year, twice as many CEOs around the world believe the global economy will improve in the next 12 months.

In China, 47 percent of CEOs are "very confident" about their company's growth prospects. Compared with global peers, they are the least likely to be looking at new geographic markets for growth - 5 percent compared to the global average of 14 percent - and are clearly focused on the domestic market.

China's CEOs' Sinocentric focus is spurred by many reasons: urbanization, transformation of State-owned enterprises, an increasingly liberalized capital market, and the upgrade and evolution of traditional sectors, said Li Ming, PwC China advisory services leader in Central China.

"A strong focus on the domestic market does not necessarily mean that China's enterprises are not interested in the overseas market," Li said. "On one hand, the domestic market offers many appealing opportunities. On the other, many of China's enterprises are setting up dual headquarters - one in China and one outside China - to integrate resources and enhance management capabilities for future overseas opportunities."

Innovation is also a particularly strong theme. China's CEOs see their best prospects in new product or services innovations - 52 percent compared with the global average of 35 percent.

When asked about the type of change program they were most likely to have completed or have underway, the most common response, 38 percent, related to R&D and innovation capacity. The global average was 27 percent.

"China is experiencing a significant economic and social transformation, creating enormous opportunities and new challenges for China's CEOs," said Nora Wu, PwC Global board member and PwC China Shanghai senior partner.

China's stable economic growth, an expanding middle class and an increasingly important role in the global arena have created solid fundamentals for companies' development in the country.

Innovation is becoming the new growth driver for both individual companies and the country overall, and will contribute to China's enduring and sustainable development, Li of PwC's China Advisory Services said.

When asked to look five years ahead, China's CEOs identified three major trends that will transform their business. More than 80 percent cited technological advances, 62 percent pointed to urbanization and 55 percent mentioned the shift in global economic power.

Technology is changing the way enterprises operate and disrupting traditional business models by restructuring the value chain, Li said.

Urbanization may spur the easing of regional disparity and bring a more mature opportunity for growth in China's vast interior.

Keeping pace with fast-changing demand in China is key to success for multinational enterprises in the country, Li said.

They are "unlikely to win by applying the strategies of two decades ago to the current Chinese market," Li said. "Enterprises need to find their fortes and niche markets to win in China. It does not necessarily mean winning in every aspect and every region in China."

wuyiyao@chinadaily.com.cn

(China Daily USA 04/29/2014 page3)