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Transforming for the future

Honson To and Benny Liu, Chairmen of KPMG China on what business leaders in Mainland China are currently focusing on to achieve growth objectives.

In today’s rapidly changing and complex business environment, chief executive officers in China are looking to innovate and transform their companies in order to remain competitive and succeed.

This was a clear message conveyed by 125 CEOs of China-headquartered companies, who formed part of a larger global KPMG survey of nearly 1,300 CEOs on their investment priorities, concerns and growth initiatives.

The survey results tell us that China CEOs are aware of the need for their companies to innovate and transform, and expect their companies to be transformed into a significantly different entity over the next three years. This is likely to be largely driven by the adoption of new technologies and processes, the introduction of new products and services, and the emergence of new business and operating models.

This impetus to transform can be partly attributed to the fast-changing business environment. Furthermore, with China’s restructuring process and increasingly sophisticated domestic consumers creating both challenges and opportunities, many CEOs are responding by embracing technological disruption to create new products and innovate their production and distribution models.

This indicates that technological disruption has become the “new normal,” especially given the fast pace at which supply and demand dynamics are changing in the Chinese market. Indeed, many of the CEOs we speak with are expecting major disruption in their industries as a result of technological innovation. More importantly, they view this disruption as an opportunity rather than a threat.

Against this backdrop, new and cutting-edge technologies are providing a range of new possibilities for Chinese companies in both traditional and high value-added industries to boost productivity and increase their competitiveness in domestic and global markets.

We are therefore seeing an increased investment in a range of disruptive technologies – including data analytics tools, the Internet of Things, cognitive technologies, blockchain and robotic process automation – with innovation as a key strategic priority for growth.

China CEOs also tell us that achieving greater speed to market, becoming more data-driven and implementing disruptive technology are their other top priorities. This is aligned with their drive for innovation, and also indicates that they are aware that disrupting the market depends, in many ways, on the speed at which their innovations are taken to the market, as well as the importance of harnessing data to better predict demand changes.

On a more macro level, China CEOs are more upbeat about the pace of globalization than most of their global peers. In our view, there are two key reasons for this optimism. Firstly, China’s government is developing an “enabling environment” for overseas direct investment through the implementation of policies and initiatives such as the “Belt and Road” and “International Production Capacity Cooperation initiatives.”

Secondly, China’s top leadership has taken a strong stance against protectionism, and has reiterated its commitment to global free trade and investment liberalization. The China CEOs we speak with are certainly committed to globalization, and recognize the need to highlight the positive impacts it brings.

In addition, it is clear that China CEOs’ appetite for investing overseas remains. According to the survey, their top three regions for investment are Asia Pacific, Central and South America, and Central Asia, which shows the impact that the “Belt and Road” and “International Production Capacity Cooperation” initiatives are having on the investment outlook of Chinese companies.

Overall, the majority of surveyed China CEOs are optimistic about the growth outlook. In particular, they share a more upbeat sentiment than their global peers on the growth prospects for their companies. This optimism is evident, many are anticipating positive top-line growth and an increase to their headcount over the next year.

To achieve these growth objectives, CEOs will need to apply a greater focus on attracting the right talent to effectively adopt and deploy new technologies, deliver on growth plans, and enhance innovation and transformation capabilities.

With China’s economic transformation spurring the creation of new drivers of growth and opportunities, CEOs will continue to focus on growth, strengthening their capabilities and readying their businesses for a very different future, through transformation, advanced technology and specialized talent.

For the full analysis, we encourage you to read our report: www.kpmg.com/cn/ceooutlook

This article was originally published in the October 2017 issue of A Plus. You can read the digital version here.