A new survey shows that innovation is driving growth in China.
Chinese Premier Li Keqiang’s recent visit to Australia coincided with the release of CPA Australia’s third annual China Economic Sentiment Survey, which canvassed the expectations of Mainland China-based members for their business and China’s economy in 2017.
The survey reveals confidence China’s GDP will grow 6 to 6.9 per cent this year, broadly in line with the Central Government’s 6.5 per cent target. As in the 2016 survey, rising costs associated with modernising and transforming to a higher value-added model is seen as the biggest economic challenge.
“The results show confidence in China’s economy remains high and that policy initiatives and reforms the Central Government is implementing are targeting the right areas to achieve continued and sustainable growth,” says former CPA Australia chief executive Alex Malley.
Challenges ahead but confidence remains high
Premier Li has not underestimated the challenges China faces realising its goal, stating: “6.5 per cent growth is not low speed and will not be easy for us to meet.”
In his opening address to the National People’s Congress in early March he acknowledged: “There are many uncertainties about the direction of the major economies’ policies and their spill-over effects, and the factors that could cause instability and uncertainty are visibly increasing.”
However, CPA Australia’s survey confirms China’s ongoing emphasis on innovation is expected to deliver. Around a third of respondents identify innovation and policies to make China’s economy “intelligence-led” as vital.
Other positive initiatives cited include the Belt and Road action plan to create the world’s largest platform for economic cooperation, and further liberalisation through supply-side reforms.
“As China’s enterprises continue to move up the value chain, costs will inevitably rise as the nature of the workforce changes with increasingly skilled labour required and higher quality equipment and materials,” says CPA Australia South China Committee President Peter Kung.
At a press conference in Beijing to launch the survey, it was suggested company cost controls could be improved by understanding the financial drivers of a business and how they should be managed, ensuring a thorough understanding of client and market segmentation, and improving expense management. The importance of talent acquisition and development and strong IP protection was also emphasised.
Optimism around employment and company profits
But rising costs have not dampened employment and profit expectations. Over half of respondents expect the headcount in their company to grow in 2017 and over 60 per cent believe their employer’s profit will increase.
This potentially indicates most businesses are currently increasing profits through increased sales rather than cutting expenses or extracting more value from assets.
In fact, 27 per cent of respondents “definitely” expect their company to introduce a new product, service or process to China this year.
IT is identified as the sector most likely to lead China’s growth, reflecting the strong focus Chinese businesses have on e-commerce.
According to Malley, China’s focus on innovation should be a major driver of economic growth for years to come.