22nd Annual Global CEO Survey China Report

Amidst ever present

challenges,
opportunities remain
to create business
and economic value
22nd Annual Global CEO Survey China Report 2
 22nd Annual Global CEO Survey China Report 3

Table of Contents

4 7 10 12

Chairman’s Message Executive Summary Introduction to the Survey Chapter 1:

Growth and revenue prospects

18 27 33 45

Chapter 2: Chapter 3: Chapter 4: Conclusion

Challenges to growth and Data analytics and cybersecurity Artificial intelligence and people
how to tackle them
 nd 4
22nd Annual Global CEO Survey China Report

Chairman’s
message
 22nd Annual Global CEO Survey China Report 5

These are interesting times for China and the world. protectionism and trade conflicts, executives in China shifting their sourcing strategy as an immediate response
Rising pessimism around growth prospects, protectionist were reliant on their own growing capabilities, focused on to the trade conflict. In terms of their investment strategy
and populist sentiments are causes for concern for capitalising opportunities in the domestic market and the three most favoured destinations were the European
business leaders. Although China’s 6.6% growth rate in invested in data and AI to capture economic and Union, Asia Pacific and the Belt and Road Initiative (“BRI”)
2018 is a very high rate among the world’s major productivity benefits. The results also uncovered that a countries.
economies, China is facing economic headwinds with a higher proportion of executives in Mainland China were
slowing GDP growth rate, deleveraging measures and a more optimistic about global economic growth prospects (ii) Grow capabilities and therefore resilience for new
trade war spanning a few months. Despite these in the next 12 months than their global and Hong Kong economy realities.
uncertainties, China’s quest for continuing economic counterparts. A higher proportion of Mainland Chinese
There is continuous pressure to build capabilities,
transformation and its focus on science and technology executives were also “very confident” in terms of revenue
however, in the China context, investing in data analytics
driven innovation has not been dampened. In 2018 at the growth prospects in the next 3 years compared to
and AI is aligned with China’s strategic priorities to
40th anniversary of its opening up, China announced executives globally and in Hong Kong.
become a technology and innovation driven economy.
further market liberalisation measures to drive and
As far as global business confidence is concerned, Only 14% of Chinese executives had no plans to pursue
encourage investment in innovation, science and
executives in China see maintaining stability and AI initiatives at the moment suggesting that the majority
technology. This has raised intense interest from investors
confidence as paramount to cushioning the direct impact have implemented AI initiatives to varying degrees.
to participate in this once-closed market.
of trade war. The real underlying concern arising from the Additionally, when compared to competitors in their
Meanwhile, Hong Kong’s annual GDP growth has wavering confidence levels is the psychological impact industry, only 5% of executives in China feel they are
decelerated to 3% in 2018 from 3.8% in 2017. Hong towards investment decisions resulting in such decisions behind in terms of their organisation's ability to make
Kong’s economy will continue to face headwinds. Hong being delayed or not pursued. decisions based on data and analytics.
Kong has been instrumental to the development of
Amidst ever present uncertainties and the expectation of a In terms of organisational resilience and readiness to deal
Mainland China’s capital market and, going forward, Hong
renegotiated trade agreement, based on this edition of the with crisis, 87% of Chinese executives compared to 75%
Kong will strategically leverage its strengths to capture the
22nd Annual Global CEO Survey China Report, I posit that globally have invested in cyber resilience, and 91%
opportunities arising from Mainland China, for example,
during periods of economic adjustment and market actively managed privacy and security risks compared to
through participation in the Greater Bay Area initiative.
transition, business leaders will have to: 88% at the global level. It is also the responsibility of
Given Hong Kong is closely connected with Mainland
business leaders to ensure that reskilling workers is at the
China’s economy, the diverse economic structure and
(i) Remain strategically focused and be flexible and core of building resilience against transformative trends.
policy frameworks between the two countries, presents
agile enough to adjust supply chains to diversify risk 53% of executives in China told us that retraining or
different challenges for the private sector in Hong Kong
where necessary. upskilling is most important in closing the skills gap in their
thereby resulting in varying market sentiments between
organisation compared to 46% at the global level.
executives in Hong Kong and China. While relying on core strength and competitive advantage
is key during times of uncertainty, being agile and having
During this complicated environment in 2018, PwC
the flexibility to adapt to course correction are also critical.
conducted its 22nd Annual Global CEO Survey. The
survey results revealed that despite concerns about Survey results found that 64% of executives in China are
 nd Annual Global CEO Survey China Report
22nd 6
22 Annual Global CEO Survey China Report

(iii) Ensure that technology and innovation is not just adjustment and course correction. Although the long term Raymund Chao
a cost proposition but a value proposition. resolution for the trade war is unknown, by remaining
PwC Asia Pacific and
flexible and accommodating, some of the uncontrollable
It is the responsibility of business leaders to think Greater China Chairman
threats can be weathered.
strategically about the impact of AI on the business.
Thinking critically to ensure that data analytics and AI are I would like to thank the 176 company leaders from China
leveraged to produce value across the social, economic and Hong Kong who have taken the time to share their
and environmental spectrum will generate positive views with us. We greatly appreciate the willingness of our
impacts to help solve the multi-dimensional challenges respondents in sharing their views on business
confronting China and the world. 89% of executives in challenges, concerns and opportunities. These insights
China think AI is good for society (compared to 79% of shed light on how Chinese executives are navigating
their global counterparts) and that encouraging AI uncertainties during China’s economic transformation and
developments with vision and governance will be key. capturing opportunities during an interesting junction in
world history.
Business leaders today have a great opportunity and
responsibility to lead through a period of economic
 nd
22nd Annual Global CEO Survey China Report 7

Executive
Summary
 22nd Annual Global CEO Survey China Report 8

The business community in China have had to • CEOs in China are confident of revenue growth In terms of economic, policy and social threats, trade
contend with a variety of risks to global and despite global economic slowdown conflicts was the primary concern for 78% of the
domestic growth in the past year against a Chinese CEOs surveyed, followed by policy
backdrop of heightened geopolitical and 35% of Mainland Chinese business leaders feel “very uncertainty and geopolitical uncertainty (73%), and
economic uncertainty. PwC’s 22nd Annual Global confident” in their company’s prospects for revenue protectionism (72%). As a response to the trade
CEO Survey China Report offers insights into growth over the next 12 months. A higher proportion conflicts, Mainland Chinese CEOs are adjusting their
how Chinese executives are responding to (47%) are confident about their company’s growth supply chain and sourcing strategy (70%) and shifting
business challenges in this volatile environment. prospects over the next 3 years. This is a reflection of their growth strategy (52%) and production (40%) to
Survey results find that despite the on-going US- the increasing importance of the domestic market for alternate territories.
China trade war, CEOs in China are more growth and the prevalence of growth sectors.
optimistic about global growth in the next 12 • Cross-border investment is being directed to Belt
• CEOs in China are more optimistic about global and Road countries, Asia Pacific and the European
months than their global counterparts. In the
growth in the next 12 months than their global Union, evidence that Chinese executives are
short term, the economy is expected to face
counterparts shifting their sourcing and production in light of
challenges as a result of both the domestic
reforms at home as well as due to the the trade tensions
Mainland Chinese executives’ outlook for the global
complicated external environment. While economy in the next 12 months is similarly optimistic. For Mainland Chinese CEOs that have invested
executives in China are believers in AI and 73% of CEOs in Mainland China believe that global abroad in the past and will continue to do so, or those
government’s role in its development, due to economic growth will improve, compared to 41% of hoping to start in the future, the top three geographic
capability gaps, it seems that they are unable CEOs in Hong Kong and 42% globally. They are regions that are a priority for outbound investments are
to leverage the value from data and analytics, probably down playing fears to maintain stability and Belt and Road countries (59%), Asia Pacific (56%) and
despite recognition of its importance as a confidence as a way to cushion the direct impact of the the European Union (47%). Investment in these
competitive advantage. Other key findings from trade war. regions are rising as executives are shifting their
this report are as follows:
sourcing and production to alternate territories in light
• Trade conflicts, policy uncertainty and geopolitical
of the trade tensions.
uncertainty are the top economic, policy and social
threats Chinese executives face and they are
responding by adjusting supply chains to
diversify risk
 22nd Annual Global CEO Survey China Report 9

• Chinese companies rely on various data sources China has the competitive advantage in terms of high Overwhelmingly large proportion of Chinese
to stay competitive while experiencing information penetration rate of mobile devices, robust data executives (92%; Global: 85%) are of the view that the
gap, suggesting that companies are unable to infrastructure, availability of data centres and cloud adoption of AI will significantly change the way they do
sufficiently extract value and insights from the data computing services, relative ease of obtaining business in the next five years, of which 38% (Global:
collected for different purposes consumer data and wide adoption of IoT sensors in 40%) strongly agree with such statement.
businesses and government.
While there are areas where the data available is They agree that AI is good for society (89%; Global:
comprehensive enough to facilitate decision-making, • Capability gap is impacting the bottom line, which 79%) and that it is likely to have a larger impact on the
there are some areas where a clear information gap is being resolved by public and private sectors world than the Internet Revolution (84%; Global: 62%).
has emerged. Comparing the difference between the working through retraining and education In regards to government involvement in this area,
degree of importance and comprehensiveness of data 85% of Chinese executives agree that government
available, the gaps are as follows: data about risks to When asked about the impact of the lack of availability should play a critical and integral role in AI
which the business is exposed (65%), data about tax of key skills on organisational growth prospects, development (Global: 68%).
implications/risks arising from your decisions (64%), Chinese executives (asked of those who are
data for financial forecasts and projections (63%), as somewhat or extremely concerned by this threat)
well as benchmarking data on the performance of reported a wide range of challenges including the
industry peers (62%). inability to innovate effectively (53%; Global: 48%),
impact on quality standards and/or customer
• Conducive business environment and data experience (52%; Global: 39%), as well as the more-
infrastructure have put Chinese firms ahead of
competition

13% of the China sample (Global: 12%) said they are

“significantly ahead” of their competitors in the industry
when assessing their organisation’s ability to make
than-expected rise in people costs (50%; Global: 47%)
which would understandably weigh on business
competitiveness.

In response to the capability gap, significant retraining

or upskilling of the existing workforce (53%; Global:
85%
of Chinese executives agree that government should
decisions based on data and analytics, while 56% 46%) is seen as the main lever for Chinese business
play a critical and integral role in AI development
(Global: 38%) consider themselves “somewhat ahead” leaders to narrow if not close the skills gaps, followed
of the game. by hiring from competitors (20%; Global: 14%).

Strong confidence in data usage and analytics can be • Chinese executives are strong believers in AI and
reflective of a conducive business environment for government’s involvement in the space is seen as
companies whose operations revolve around data. instrumental
 nd Annual Global CEO Survey China Report
22nd 10
22 Annual Global CEO Survey China Report

Introduction
to the Survey
 22nd
nd Annual Global CEO Survey China Report 11

These are interesting times for China and the world.

Global economic growth slowed in the second half of
20181 and China is facing economic headwinds with a
slowing GDP growth rate, deleveraging measures and a
trade dispute spanning several months. During this
climate of economic, geopolitical complications and trade
uncertainties, PwC conducted its 22nd Annual Global CEO
Survey to gauge what executives are thinking and how
they are solving for business issues in this uncertain
environment.

The 22nd Annual Global CEO Survey was built around the
themes of Growth, Data and Analytics, Artificial
Intelligence and People. It was conducted between
September and October 2018 and interviewed more than
1,378 executives from 91 territories and a range of
sectors.

This is the China report which presents the views of 176

executives based in China and Hong Kong. For the
purposes of this report, “China” refers to the People’s
Republic of China, including Hong Kong executives.
Where there is a statistically significant difference in the
survey results between Hong Kong and Mainland China,
results are presented separately.

176
executives based in Mainland China and Hong Kong
 22nd
nd Annual Global CEO Survey China Report 12

Chapter

Growth and
1
revenue
prospects
 22nd Annual Global CEO Survey China Report 13

Mainland Chinese CEOs remain optimistic despite slowdown

Mainland Chinese executives were more positive than Figure 1

their global peers in terms of the global economic growth CEOs that predict global economic growth will improve over the next 12 months
outlook. Nearly 73%, expected global economic growth to
improve in the next 12 months compared to 42% of global
executives and about 41% of Hong Kong executives. This 80%
is the only economy among the major territories surveyed 73%
who were more optimistic this year as compared to last 70%
year. The proportion of Mainland Chinese executives 70%
67%
(20.8%) who believed the global economic outlook over
the next 12 months would decline is less than the global 60%
average (29%) and Hong Kong average (46.9%),
suggesting higher optimism amongst executives in China. 57%
50% 46%
42%

40% 38%
37% 41%
33%

73%
29%
30% 33% 27%

20% 23% 15%

of Mainland Chinese executives expected global 10%

economic growth to improve in the next 12 months

0%
2015 2016 2017 2018 2019

Mainland China Hong Kong Global

 22nd Annual Global CEO Survey China Report 14

Figure 2
CEOs who are “very confident” on the company's revenue growth prospects

55%
52%

50% 49% 49%

51%
47%
45%
45% 44%
44% 43%
43%
42%
40% 40%
39%
35% 38% 36%
36% 36%
35% 35%
35%
35%
33%
30%

27%
27%
25%
24%
22%
20%
19%

15%
2015 2016 2017 2018 2019

Mainland China CEOs very confident in the next 12 months Mainland China CEOs very confident in the next 3 years
Hong Kong CEOs very confident in the next 12 months Hong Kong CEOs very confident in the next 3 years

Global CEOs very confident in the next 12 months Global CEOs very confident in the next 3 years
 22nd Annual Global CEO Survey China Report 15

For the 3 year time frame, survey found that a higher technology, communications, entertainment and media,
proportion of executives in Mainland China are “very and retail and consumer companies in the Mainland China
confident” about revenue growth prospects, compared to sample. These three growth sectors are buoyant to meet
executives globally and in Hong Kong. What is also the emerging consumption and investment needs of its
notable is that Hong Kong executives are particularly population and compose 59% of the sample which could
pessimistic about their own revenue growth prospects be drivers of this positive outlook.

85%
(consistent with their negative views on global growth
referenced earlier). Survey results suggest that there is a Mainland China has a growing middle class which is
sense of optimism over revenue growth prospects over a expected to double to 600 million in the next 10 to 15
longer time horizon than over the next 12 months. years.3 Given their rapid accumulation of disposable
income, executives are increasingly looking to target
Hong Kong’s annual GDP growth decelerated to 3% in domestic consumers rather than look to external markets.
of Chinese executives are “somewhat/very 2018 from 3.8% in 2017. The Hang Seng Index’s weak Particularly in the retail and consumer sector, which
confident” in their company’s prospects for revenue performance in 2018 and currency depreciation against comprises 14% of the sample, the rise in new economy
growth the US dollar are indicators of continued headwinds for trends such as e-commerce and shift to “new retail” is
Hong Kong’s economy.2 While Hong Kong’s economy is powering online spending and mobile payments.4
gradually becoming more integrated into China’s
economy, the differing economic structure and policy Technology, communications, entertainment and media
frameworks can result in varying market sentiments companies, which comprise 15% of the Mainland China
between executives in HK and China. sample, would also be bullish on growth given the
country’s strategic national priorities to be a technology
As far as global business confidence is concerned, higher and innovation driven economy. Several state directives
proportion of executives in China are found to have a have been issued to support this, for example in
positive outlook compared to their global counterparts. December 2018, the State Council approved the rollout of
They are probably down playing fears to maintain 23 pro-innovation reform measures to mobilise
stability and confidence to cushion the direct impact technological innovation resources and nurture new
of trade war as the actual impact is the uncertainty drivers of growth.5
and delaying of investment decisions. As far as their
optimism for revenue growth prospects are concerned,
this may be related to two factors: first the increasing
importance of the domestic market for growth and the
government policies supporting this, and second, the
prevalence of growth sectors such as financial services,
 22nd Annual Global CEO Survey China Report 16

The government is also taking steps to promote the

growth of privately-owned enterprises (which form 60% of
the Mainland China sample). As of June 2018, China’s
National Development and Reform Commission and the
Ministry of Commerce released a shortened negative list
ensuring sectors including financial services,
transportation and infrastructure are more or fully open to
foreign investment.6 In November 2018, President Xi
Jinping announced policies such as tax cuts and equal
treatment to support privately-owned enterprises.7 In
December 2018, during the trade negotiations with the
US, China agreed to competitive neutrality meaning that
privately owned enterprises (POEs) would get the same
treatment as state owned enterprises (SOEs).
Additionally, at the recent Central Economic Work
Conference (CEWC) held in Beijing in December 2018,
the government has pledged to keep prudent monetary
policy while maintaining market liquidity at a reasonably
ample level and make direct financing more accessible
and affordable for the private sector and small businesses.8

Another reason for the positive outlook is that the largest

proportion of the Mainland China sample of executives
(28%) are from the financial services industry. This sector
is opening up considerably and PwC estimates that by
2020 Mainland China will be the second largest Asian
asset management market fuelled by an 8.7% CAGR in
total investable assets from 145 trillion yuan to 260 trillion
yuan. As of June 2018, the government removed the
foreign ownership cap for banks and asset management
companies and raised the cap to 51% for other financial
services companies including fund managers and life
insurers.9 According to CEWC meeting outcome, China
has started to liberalise more sectors for overseas
investors from finance to manufacturing, while continuing
to protect the intellectual property rights and interests of
foreign companies.
 22nd Annual Global CEO Survey China Report 17

Ranking of key markets for growth

In terms of the ranking of attractiveness of countries as In Hong Kong, the three economies (apart from their own)
being most important to their organisation’s overall growth that CEOs consider as being most important to their
prospects over the next 12 months, for Mainland Chinese organisation’s overall growth prospects over the next 12
CEOs, Australia was ranked first this year, while the US months are China (50%), followed by India (15.6%) and
has dropped to second place from its top position in 2018, Australia, Vietnam and USA (each 12.5%). At the global
followed by Japan. The impact of the trade conflict has level, the ranking of countries remains unchanged from
meant that Chinese CEOs are less reliant on the US and 2018 with the USA, Mainland China and Germany being
thus are looking elsewhere for growth opportunities. the top three territories that are most important for overall
growth prospects over the next 12 months.
Figure 3
Top three territories that are important for overall growth prospects over the next 12 months It is important to note that the level of uncertainty among
CEOs about their expansion plans outside of their home
2018 2019 markets has increased significantly this year. Globally,
15% of CEOs stated they “don’t know” which territories
USA 59% 21% Australia are important for growth prospects (up from 8% in 2018).
The data also shows that executives are looking inward
Hong Kong 31% 17% USA
and focusing on their domestic markets for growth. This is
Japan 25% Mainland China 13% Japan very prominent among Mainland Chinese CEOs, where
the proportion who opted for “no other country” was up
Mainland China 67% 50% Mainland China significantly (17% chose this option compared to none last
USA 58% 16% India year). This is not surprising given the realities of the
Japan, Australia, USA,
current trade environment and the promise of the growing
18% Hong Kong 13%
Singapore, UK Vietnam middle class consumer base in China.

USA 46% 27% USA

Mainland China 33% 24% Mainland China

Germany 20% Global 13% Germany

 22nd
22 nd Annual
Annual Global
Global CEO
CEO Survey
Survey China
China Report
Report 18

Chapter 2
Challenges to
growth and how
to tackle them
 22nd Annual Global CEO Survey China Report 19

Business threats are correlated to trade tensions

Despite the sense of optimism in revenue growth among Global: 79%). It is interesting that supply chain disruption
Chinese CEOs over a longer time horizon, in the short and energy costs were not cited among the top three risks
term there are headwinds that CEOs are facing both in in 2018 and hence signal the impact the trade tensions
their own business operations and in the policy and and oil price volatility are having on businesses.i In terms
economic environment. In terms of top three business of the top three business risks faced by executives in
threats to organisation’s growth prospects, 68% of Hong Kong, 78% cited speed of technological change
executives in Mainland China cited supply chain (Mainland China: 61%; Global: 69%), 72% cited real
disruption (Hong Kong: 56%; Global: 50%), 68% cited estate costs (Mainland China: 61%; Global: 33%) and
Figure 4 volatile energy costs (Hong Kong: 50%; Global: 52%) and 69% cited readiness to respond to a crisis (Mainland
Top business threats to organisations’ growth prospects 64% cited availability of key skills (Hong Kong: 66%; China: 58%; Global: 58%).

“Somewhat” or
2018 2019
“extremely concerned”
Supply chain disruption, Volatile
Availability of key skills 94% 68% energy costs
Readiness to respond to a crisis 93% 64% Availability of key skills
New market entrants, Speed of Speed of technological change,
technological change, Cyber threats 91% 61%
Real estate costs
Volatile commodity prices, Volatile energy costs 89% Mainland China 60% Volatile commodity prices
Activist investors or other campaigners, Rising 86% 58% Readiness to respond to a crisis
employee benefits and pension costs
Changing consumer behaviour, Speed of
technological change 88% 78% Speed of technological change
Lack of trust in business, Cyber threats 85% 72% Real estate costs
Rising employee benefits and pension costs 79% 69% Readiness to respond to a crisis
New market entrants 76% 66% Availability of key skills
Hong Kong
Changing consumer behaviour, Lack of
Readiness to respond to a crisis 73% 63% trust in business, Cyber threats, Changing
workforce demographics
Cyber threats, Availability of key skills 80% 79% Availability of key skills
Speed of technological change 76% 69% Cyber threats, Speed of technological change
Changing consumer behaviour 68% 60% Changing consumer behaviour
Readiness to respond to a crisis 67% 58% Readiness to respond to a crisis
Global
New market entrants 63% 55% New market entrants

*Please note: 2019 was the first year CEOs were asked about ‘real estate costs’ and ‘changing workforce demographics’

i. Thefact that supply chains have become so integrated, incorporating R&D, design and logistics and bundling goods and services, means that the impact of the trade tariffs have been magnified both domestically and globally. In terms of energy
costs, in 2018 oil prices have been impacted by excess supply and low demand growth following the building up of US oil inventory, overproduction by OPEC and the softening of original Iran sanctions by the US government.
 22nd Annual Global CEO Survey China Report 20

Macro threats loom large for CEOs

When asked about the top economic, policy, social, and It is interesting to see that at the global level, trade conflict
environmental threats to organisations’ growth prospects was not the top concern. Instead, 78% of executives
this year, trade conflicts was the primary concern for 78% worried about policy uncertainty, 75% were concerned
of the Chinese CEOs surveyed, followed by policy with geopolitical uncertainty and 73% about uncertain
uncertainty and geopolitical uncertainty (73%), and economic growth and over-regulation.
protectionism (72%). Rising economic nationalism, with
policies such as “America First” has meant that some of the
other concerns that came to the fore in 2018 such as
social instability and increasing tax burden are no longer
top of mind.
Figure 5
Top economic, policy, social and environmental threats to organisations’ growth prospects

“Somewhat” or
2018 2019
“extremely concerned”
Social instability, Over-regulation,
Geopolitical uncertainty, 90% 78% Trade conflicts
Exchange rate volatility, Protectionism Policy uncertainty, Geopolitical
Increasing tax burden, Terrorism 89% 73%
uncertainty
Future of the Eurozone 87% 72% Protectionism
Uncertain economic growth 86% China 70% Uncertain economic growth
Populism 85% 68% Exchange rate volatility

Geopolitical uncertainty 85% 78% Policy uncertainty

Over-regulation 83% 75% Geopolitical uncertainty
Uncertain economic growth,
Increasing tax burden 78% 73%
Over-regulation
Protectionism 76% Global 70% Trade conflicts
Uncertain economic growth 74% 68% Protectionism

*Please note: 2019 was the first year CEOs were asked about ‘policy uncertainty’ and ‘trade conflicts’
 22nd Annual Global CEO Survey China Report 21

Trade conflicts are altering

sourcing strategies to
diversify risk

For those executives who were “somewhat or extremely

concerned” about trade conflicts, they were queried on
which specific trade conflicts were top of mind. 91% of
Mainland Chinese executives were worried about the
trade conflict between China and the US (Hong Kong:
96%; Global: 81%) and 37% about the trade conflict
between the US and European Union (Hong Kong: 18%;
Global: 44%). CEOs were also asked how these were
affecting their operating model and growth strategy. In
light of the trade tariffs on US $250 billion of Mainland
Chinese products by the US, 70% of Mainland Chinese
executives are adjusting their supply chain and sourcing
strategy, 52% are shifting their growth strategy to
alternate territories, and 40% are shifting their production
to alternate territories.

Given the fact that 13% of the Mainland Chinese CEOs

surveyed are in the industrial manufacturing sector and an
additional 5% are in engineering and construction, tariffs
on commodities such as steel and aluminum is expected
to impact them. Mainland China is the world’s largest
exporter of manufactured goods, by a large margin.
However over the past decade, factory owners have
begun moving production to developing countries such as
Bangladesh, Cambodia and Vietnam in view of the
cheaper wages and as a way to diversify political and
economic risk. This is expected to intensify due to the
trade measures.10
 22nd Annual Global CEO Survey China Report 22

Taxation in Mainland
China is still complex

66%
of Mainland Chinese executives were concerned about
the rate of tax that their organisation pays

60%
of Mainland Chinese executives were concerned about
the complexity of the tax legislation

65% of Mainland Chinese executives were “somewhat or spite of technological advances in tax compliance as well
extremely concerned” about the increasing tax burden. as a significant overhaul of the tax system including the
These executives were also queried on which specific removal of business tax and the digitalisation of VAT
concerns they had in mind. 66% of Mainland Chinese compliance, PwC’s Paying Taxes 2019 report finds that
executives were concerned about the rate of tax that their Mainland China’s tax system is still seen to be
organisation pays (Hong Kong: 79%; Global: 70%) and complicated, particularly in terms of the different number
60% of executives were concerned about the complexity of taxation requirements.11
of the tax legislation (Hong Kong: 74%; Global: 61%). In
 22nd Annual Global CEO Survey China Report 23

Drivers of revenue growth amid economic uncertainty

To drive their revenue growth in the next 12 months, Figure 6

high proportions of executives in China opted to focus Activities to drive revenue growth in the next 12 months
on operational efficiencies (61.9%), launch a new
product or service (61.9%) and enter into a new
strategic alliance/joint venture (58.5%) as the primary 62%
activities. On the other hand, global CEOs considered Operational efficiences
77%
organic growth (71.5%), operational efficiencies
(77.1%) and launching a new product or service (62%)
Launch a new 62%
as favoured measures to drive revenue growth.
product or service 62%
Survey results found that “entering a new market” or
“new M&A” activity doesn’t appear to be a priority for
executives in China as well as globally. New strategic alliance 58%
or joint venture 40%
Chinese CEOs may be more risk averse amid the
economic uncertainty and the depreciation of the yuan 55%
has also made outbound M&A more costly to Enter a new market
37%
execute.12 Moreover executives globally are under
pressure from regulatory risk and unpredictable
48%
antitrust reviews as established market environments Organic growth
71%
are being challenged by technological disruption.13

Collaborate with 44%

entrepreneurs or start-ups 32%

39%
New M&A
37%

Sell a business 23%

(or exit a market) 14%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

China Global
 22nd Annual Global CEO Survey China Report 24

In terms of their expectations to increase company headcount over the next 12 months,
another indication of growth outlook, Chinese executives were more optimistic than their
global counterparts: 69% expected to increase their headcount in 2019 (Global: 53%).

Figure 7
Expectations of increase in headcount over the next 12 months

80%

75%

70% 69%
70%

65%

59%
60%

54% 54% 53%

55%
52%

50% 48%

45%

40%
2016 2017 2018 2019

China Global
 22nd Annual Global CEO Survey China Report 25

Cross-border investment is being directed to Belt and

Road countries, Asia Pacific and the European Union
While there has been a 5% drop in the proportion of Figure 8
executives with plans for new M&A from 2018, Key motivations for Chinese executives to start or continue with overseas investment
Mainland Chinese CEOs, were asked about their
motivations for cross-border investment. 75% were
motivated by expansion of their market or customer Expand market/customer base for 75%
base for existing products or services, 66.4% by your existing products/services 77%
pursuing opportunities unique to targeted markets and
62.5% by strategic asset allocation/diversification. In a 66%
Pursue new opportunities
global economy that is increasingly characterised by unique to targeted market(s) 64%
protectionist trade policies, it follows that
diversification may help to act as a buffer against
63%
these negative effects, by ensuring Chinese Strategic asset allocation/diversification
36%
businesses are not reliant on one market or customer
base alone. Aside from the focus on the domestic
market, it is imperative that Chinese companies Aspiration to advance from domestic 57%
brand to international champion 50%
(particularly those reliant on the US market), diversify
their clients in different countries and regions as much
as possible.14 Access to global talent base
49%
41%

Enhance operational efficiency 42%

(e.g. seek low cost production
base or economy of scale) 41%

41%
Access to new technologies
18%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Mainland China Hong Kong

 22nd Annual Global CEO Survey China Report 26

In terms of types of cross-border investment, the majority $9.6 billion from January to August of this year. This
(62%) of Mainland Chinese executives have already represents a 12% year-on-year increase from the same
made cross-border investments in the form of period in 2017 and accounts for 12.9% of the total non-
partnerships and for the future, 62% said they would financial direct investment over this period. The
consider greenfield investment. In terms of the top three investment was mainly targeted at ASEAN bloc countries
geographic regions that are a priority for outbound such as Singapore, Laos, Malaysia, Pakistan, Vietnam,
investments, Mainland Chinese executives preferred Belt Indonesia, Thailand and Cambodia. Also at the CEWC,
and Road countries (58.6%), Asia Pacific (55.6%) and the one of the key policy directives was to continue the
European Union (46.6%). expansion of economic opening-up by encouraging trade
with Belt and Road countries (already more than 17 free
Data from Ministry of Commerce (MOFCOM)15 shows that trade agreements involving 25 countries and regions have
Mainland China’s non-financial direct investment flowing been finalized).16
into Belt Road Initiative projects in 55 countries totaled US

Figure 9a: Figure 9b:

Type of investments abroad Mainland Chinese executives are considering or have already made Type of investments abroad Hong Kong executives are considering or have already made

Greenfield Greenfield
62% 26% 12% 35% 47% 18%
investment investment

Joint ventures 44% 49% 6% Joint ventures 33% 48% 19%

M&A 43% 48% 9% M&A 41% 35% 24%

Partnerships 32% 62% 6% Partnerships 36% 55% 9%

0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%

We are considering it We are currently doing it We have done it in the past We are considering it We are currently doing it We have done it in the past
 22nd
22 nd Annual
Annual Global
Global CEO
CEO Survey
Survey China
China Report
Report 27

Chapter

Data
3
analytics and
cybersecurity
 22nd Annual Global CEO Survey China Report 28

Chinese companies rely on

various data sources to stay
competitive while
experiencing information
gap

Data, along with algorithm and computing power, has

played a crucial role in propelling the country’s
advancement along the AI curve. In July 2017, China’s
State Council issued a three-step road map to become a
world leader in AI by 2030. The government also included
AI in its 2015 Internet Plus Initiative, a national mandate
to stimulate economic growth through innovative, Internet-
based technologies.

The value of data in decision making is also widely

recognised as a source of competitive advantage for
Chinese companies. We asked the executives in
Mainland China how important various data categories
are to their decision making, and how adequately they
receive such data (asked only of those who consider their
data needs as critical or important), and a clear pattern of
information gap has emerged when we compare the
difference between the degree of importance and
comprehensiveness of data available.
 22nd Annual Global CEO Survey China Report 29

The information gap suggests that companies are unable On a bright note, there are areas where the data available
to sufficiently extract value and insights from the data are both important and comprehensive enough to facilitate
collected for different purposes. The information gap is decision-making (where the information gap is smallest)
distributed unevenly across different data categories and such as data about the impact of climate change on the
most prominent in these areas: data about risks to which business (66%-31%=35%), data relating to how efficiently
the business is exposed (87%-22%=65%), data about tax real estate resources are utilised (74%-34%=40%), and
implications/risks arising from your decisions (85%- data about employees’ views and needs (85%-36%=49%).
21%=64%), data for financial forecasts and projections
(96%-33%=63%), as well as benchmarking data on the
performance of industry peers (90%-28%=62%).
Figure 10
Availability and comprehensiveness of data used to make decisions about the long-term success and durability of business, Mainland China

120%

96%
100% 90% 90% 90%
87% 88%
85% 85% 84% 85%

80% 74%
66%

60%

36% 34%
40% 33% 31% 33% 31%
28% 30% 28% 28%
22% 21%
20%

0%
Data about the Data about tax Benchmarking Financial Data about your Data about the Data about your Data about your Data about how Data about your Data relating to Data about the
risks to which implications/risks data on the forecasts and customers' and effectiveness of supply chain brand and the latest employees' how efficiently impact of climate
the business is arising from your performance of projections clients' your R&D reputation technology views and needs you utilise the change on the
exposed decisions your industry preferences and processes trends benefit or real estate you business
peers needs disrupt the occupy
industry

Critical/Important Comprehensive
 22nd
22 nd Annual
Annual Global
Global CEO
CEO Survey
Survey China
China Report
Report 30

When probed about the primary reasons for Figure 11

data inadequacy or the inability to attain data, Primary reasons why the data received is not adequate or that information is not received
majority attribute the phenomenon to the lack
of analytical talent (55%; Global: 54%), poor
data reliability such as errors and incomplete 55%
data (52%; Global: 50%), as well as data Lack of analytical talent
54%
silos and lack of sharing (51%; Global: 51%).
This is comparable to global findings. It is
Poor data reliability 52%
worthwhile to note that for Hong Kong
(e.g. errors and incomplete data) 50%
companies the issue of data inadequacy is
primarily driven by data silos and lack of
sharing (67%) compared to their Mainland Data siloing and 51%
counterparts (48%), possibly as a result of lack of sharing 51%
more stringent regulation on data privacy and
consumer protection laws which inhibit the Unwillingness of customers and 47%
sharing of data. clients to share information 42%

Inability to quantify 42%

external information 40%

36%
Inadequate IT infrastructure
35%

Inability to navigate 32%

customer information
privacy rules (e.g. GDPR) 15%

Inability to adequately 22%

protect and secure the data 8%

0% 10% 20% 30% 40% 50% 60%

China Global
 22nd Annual Global CEO Survey China Report 31

Despite the pressing need to address the information gap, Chinese executives are
generally confident about data driven decision making and have demonstrated higher Conducive business
“data savviness” than their global peers. 13% of the China sample (Global: 12%) said
they are “significantly ahead” of their competitors in the industry when assessing their environment and data
organisation’s ability to make decisions based on data and analytics, while 56% (Global:
38%) consider themselves “somewhat ahead” of the game. Such confidence in the use of
infrastructure have put
data is even higher for Mainland Chinese executives (significantly or somewhat ahead:
72%) than Hong Kong executives (significantly or somewhat ahead: 56%).
Chinese firms ahead of
competition
Figure 12
Assessment of organisation’s ability to make decisions based on data and analytics compared to competitors in their industry Strong confidence in data usage can be reflective of a
conducive business environment for companies whose
operations revolve around data. China has the
13% competitive advantage in terms of high penetration rate of
Significantly ahead
12% mobile devices, robust data infrastructure, availability of
data centres and cloud computing services, relative ease
56% of obtaining consumer data and wide adoption of IoT
Somewhat ahead sensors in businesses and government.
38%
All these factors have contributed to the growing
26% popularity and use cases of data analytics particularly in
About the same
37% the new economy. For example, data-driven customer
acquisition and big data powered risk management
5% technology have allowed FinTech firms like Creditease’s
Somewhat behind Yirendai and Ping An’s Lufax to have a competitive edge
10%
in P2P online lending.17 Meanwhile, the world’s largest
money market fund, Yu’e Bao, affiliated with Ant
1% Financial, had 1.7 trillion yuan ($267.9 billion) in net
Significantly behind
2% assets as of end of March 2018 and capitalises on
Taobao’s vast consumer database and billions of
0% 10% 20% 30% 40% 50% 60% untapped online savings.18

China Global
 22nd Annual Global CEO Survey China Report 32

Chinese companies boast higher cyber-resilience

Our study finds that Chinese companies at large have However, they do recognise their vulnerability to being
exhibited strong degree of cyber resilience. 87% of subject to geopolitical cyber activity (80%; Global: 72%)
Chinese executives said their organisation is cyber- given the complexity of international relations China is
resilient shown in its ability to withstand cyber-attacks and now facing with its trading partners.
recover quickly (Global: 75%). This is supported by the
observation that more Chinese companies than their The enhanced level of cyber-resilience felt by businesses
global peers are proactively managing security and can be partly explained by the country’s strategic priority
privacy risks when adopting new technology (91%; to protect the cyberspace through the enactment of
Global: 88%), and adapting the way it monetises data to multiple regulations. The Chinese government has issued
better address data privacy and ethics (80%; Global: 67%). close to 300 new national standards related to cybersecurity
over the past several years. Of course, some of these
regulations also inevitably dampened the convenience and
ease of doing business for the private sector.ii
Figure 13

Executives’ level of agreement with statements on cyber-resilience

-180% -130% -80% -30% 20% 70%
ii.
Domestic businesses, particularly technology firms, are
70% 20% -30% -80%
China Global -130% -180%
experiencing a tightening of cybersecurity and data localisation rules
My organisation is cyber resilient governing the ownership, use, and transfer of data. However,
34% 53% — can withstand attacks and 60% 15% compared to the even greater obstacle and scrutiny Chinese tech
recover quickly companies are facing overseas in particular the US following the
My organisation proactively Section 301 trade investigation, they should find the domestic
38% 53% manages security and privacy risks 60% 28% situation more favourable with the added benefit of higher level of
when adopting new technology nationwide cybersecurity.

In contrast, foreign companies doing business in or with China are

My organisation may be affected
28% 52% 53% 19% expected to be worse off with greater regulatory oversight. With
by geopolitical cyber activity
China’s newly issued Standards for Personal Information Protection
that came into effect on 1 May 2018, foreign firms have to do more
My organisation is adapting the
to catch up with the higher and stricter compliance standards and
36% 44% way it monetises data to better 49% 18%
address data privacy and ethics localisation requirements.

Also, China’s new cyber regulations introduced in March 2018 on the

Strongly agree Agree use of virtual private networks (VPN) has added to the cost and
inconvenience for foreign companies who are more likely to rely on
cross-border communication.
 22nd Annual Global CEO Survey China Report 33

Chapter

Artificial
4
intelligence
and people
 22nd
22 nd Annual
Annual Global
Global CEO
CEO Survey
Survey China
China Report
Report 34

Over the last decade, China has made remarkable

progress to become the world’s artificial intelligence (AI)
powerhouse. Advances in data collection and algorithms,
and the prevalence of mobile devices, coupled with
aggressive R&D spending, have paved the way for the
country to achieve major breakthroughs in the AI realm.

In 2017, the market value of China's AI Industry reached

23.7 billion yuan, up 67% year on year.19 There are 1,011
companies engaged in this line of business, second only
to the U.S. number of 2,028. From 2013 to the first quarter
of 2018, AI companies in the country on an aggregated
basis received around 60% of the world’s total venture
capital investment.
 22ndndAnnual
22 AnnualGlobal
GlobalCEO
CEOSurvey
Survey China
ChinaReport
Report 35

AI adoption in Chinese businesses has outpaced global

average as fuelled by intensive R&D spending and
As much as 47% of the China sample (Global:
industry growth
42%) currently have some forms of AI
initiatives in place in their organisation: 17% Figure 14
(Global: 6%) said these initiatives are present
Executives’ usage of AI
on a wide-scale within their company while
25% (Global: 33%) said they have done so in a
limited sense. Only 14% of executives said
they have no plans to pursue any AI initiatives, We have no plans to pursue any 14%
AI initiatives at the moment
much lower than the global average of 23%. 23%

The rate of adoption in AI and related

We have plans to start introducing AI initiatives 39%
technology in China has clearly accelerated in
in our organisation in the next 3 years 35%
the private sector and will continue to grow in
the coming years. 39% of Chinese executives
indicated they have plans to start introducing We have introduced AI initiatives 25%
AI initiatives in their organisation in the next 3 in our business, but only for limited uses 33%
years, 4 percentage points higher than their
global counterparts.
AI initiatives are present on a 17%
wide-scale in our organisation 6%

AI initiatives are fundamental 5%

to our organisation's operations 3%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

China Global
 22nd Annual Global CEO Survey China Report 36

There is in fact no shortage of AI use cases in e-

commerce, FinTech, health care, automotive, amongst
other sectors, while increasingly more traditional
companies are experimenting with AI in an attempt to
reorganise or reinvent the business process. R&D
investment in high-end technology has a notable role to
play in accelerating AI dissemination and adoption.

According to PwC’s Innovation 1000 Study 2018, Chinese

companies’ R&D spending increased by 34.4% to reach
US$60.08 billion, marking the largest growth globally. In
addition, R&D spending has increased in all industries in
China, especially in the software and internet as well as
industrial sectors. Twenty more Chinese companies
entered the Global Innovation 1000 list compared with last
year, thanks to the country’s strategic move to gear up
developing an innovation-driven country.20

On the other hand, China is dubbed the country with the

most number of patents published in AI, constituting 22%
of the world’s total and slightly edging the United States
and Japan, according to "China's AI Development Report
2018" released by Tsinghua University.21
 22nd Annual Global CEO Survey China Report 37

Chinese executives are

Figure 15
Executives’ level of agreement with statements about AI

strong believers in AI and 60% China 10% -40% -90%

Global -140%

government’s involvement 27% 63%

AI-based decisions
need to be explainable 58% 26%
in the space is seen as in order to be trusted

Governments should play

instrumental 33% 52% a critical and integral
role in AI development
47% 21%

39% 50% AI is good for society 61% 18%

It appears that the business community in China are
believers in AI and have widely embraced the positive
externalities brought by such technology. First, they AI will displace more
35% 50% jobs than it creates 37% 12%
strongly believe that AI is good for society (89%; Global: in the long run
79%) and that it has a larger impact on the world than the
Internet Revolution (84%; Global: 62%). They are also of AI will eliminate human
32% 49% 39% 9%
the view that AI will become as smart as humans (70%; bias such as gender bias
Global: 45%) and will help eliminate human bias in work
AI will have a larger
situations such as gender bias (81%; Global: 48%). 36% 48% impact on the world than 41% 21%
the Internet revolution

AI will become as
24% 46% 33% 12%
smart as humans

Strongly agree Agree

 22nd Annual Global CEO Survey China Report 38

Overwhelmingly large proportion of Chinese Figure 16

executives (92%; Global: 85%) are of the view Executives’ view on whether AI will significantly change the way they do business in the next 5 years
that the adoption of AI will significantly change
the way they do business in the next five years,
of which 38% (Global: 40%) strongly agree 38%
Strongly agree
with such statement. 40%

54%
Agree
45%

6%
Disagree
11%

2%
Strongly disagree
2%

0% 10% 20% 30% 40% 50% 60%

China Global
 22nd Annual Global CEO Survey China Report 39

With regard to government involvement in this area, 85% Figure 17

of Chinese executives agree that government should play Executives’ level of agreement with statements about government involvement in AI
a critical and integral role in AI development (Global: -190% -140% -90% -40% 10% 60%
68%). In particular, there are multiple asks of the 60% 10% -40% -90%
China Global-140% -190%
government to do more including: incentivising to retrain
Governments should individually
workers whose jobs are automated by AI (91%; Global: develop a national strategy and
65%), providing a safety net for people displaced by AI 32% 55% 56% 20%
policies for AI including expected
(82%; Global: 56%), introducing incentives to accelerate impact on communities
the development and use of AI (84%; Global: 66%), and Governments should allow
developing a national strategy and policies for AI including 28% 54% organisations to self-regulate 48% 11%
expected impact on communities (87%, Global: 76%). the use of AI

Business leaders are also hoping for regulatory Governments should incentivise
37% 54% organisations to retrain workers 46% 19%
relaxation. They are in strong agreement that the
whose jobs are automated by AI
government should limit regulations around data
collection to facilitate AI development (81%; Global: 52%), Governments should introduce
while to a certain extent allowing organisations to self- 33% 51% incentives to accelerate the 50% 16%
regulate the use of AI (82%; Global: 59%). development and use of AI

Governments should limit regulations

31% 50% around data collection to facilitate 42% 10%
the development of AI

Governments should provide a

34% 48% 43% 13%
safety net to people displaced by AI

Governments should
intentionally slow down the
23% 40% 18% 6%
replacement of workersby AI to
avoid widespread job displacement

Strongly agree Agree

 22nd Annual Global CEO Survey China Report 40

Industry advancement in AI has revealed capability gap, calling for realignment of

jobs and skills in the labour market

On a broader scale, higher proportion of business leaders Figure 18

in China are somewhat or extremely concerned about Executives’ level of difficulty to hire workers in their industry
changing workforce demographics (56%; Global: 50%)
and the unemployment of the workforce in general (48%;
Global: 41%).

The country’s working-age population in 2017 dropped to

its lowest level in nine years, to below a billion for the first
time since 2010.22 Also, the number of university
graduates in China has reached record high at 7.35 7%
million in 2017 (7.04 million from last year) and more than
26%
double that of a decade ago, posing additional pressure
on young worker employment, according to data from 40%
Ministry of Education.23 31%
China
Global
In general, China CEOs have experienced less difficulty
62%
than many countries in hiring workers in their respective
34%
industries thanks to rising supply of university graduates
and steady worker migration to urban centres. Only 40%
said it has become more difficult for them do so compared
to the global average of 62%, although significant
difference is still evident between the Mainland China
(35%) and Hong Kong sample (63%).
More difficult Unchanged Less difficult
 22nd Annual Global CEO Survey China Report 41

However, for those who did experience more Figure 19

difficulty in hiring, 38% noted it is mainly Executives’ reasoning as to why it has become more difficult to hire skilled workers
caused by the deficit in the supply of skilled
workers, indicating that for some companies
they still have a hard time finding the right hires Deficit in supply 38%
from the existing pool of young workers despite of skilled workers 50%
the country’s huge supply of university
graduates every year.
Skills requirements in 21%
Other notable reasons for more difficulty in our industry have changed
19%
hiring included change in skill requirements in
their industry (21%; Global: 19%),
compensation expectation (18%; Global 9%), 18%
Compensation expectations
and growth in the industry (13%; Global 8%). 9%
Clearly, structural changes in the many
industries and rapid growth of the new
economy also led to the emergence of jobs 13%
Growth rate of the industry
that call for drastically different skill sets. Job 8%
titles which were barely heard of a decade ago
such as data scientists and machine learning
6%
specialists have become numerous and highly Working conditions
sought after today. 3%

4%
Candidates' view of industry
reputation has changed 8%

0% 10% 20% 30% 40% 50% 60%

China Global
 22nd Annual Global CEO Survey China Report 42

In particular, the rapid pace at which different forms of AI-

enabled automation are being adopted and implemented
in traditional manufacturing sectors — in response to the
government’s call for industrial upgrading and digital
transformation — has sparked worry of large scale job
displacement. Survey found that considerably higher
proportion of Chinese executives believe that AI will
displace more jobs than it creates in the long run (85%)
compared to the global average (49%).

While the net outcome of AI impacts on jobs is mixed and

differ across industries, it is a good opportunity for all the
stakeholders to reassess their own situations and as part
of the economic transformation of the labour market to
make the necessary readjustment, even though it means
certain jobs will be displaced.iii
 22nd Annual Global CEO Survey China Report 43

Capability gap is impacting the bottom line, which is

being resolved by public and private sectors working
When asked about the impact of the lack of availability
through retraining and education
of key skills on organisational growth prospects,
Chinese executives (asked of those who are Figure 20
somewhat or extremely concerned by this threat)
Impact of lack of ‘availability of key skills’ on organisation’s growth prospects
reported a wide range of challenges including the
inability to innovate effectively (53%; Global:48%),
impact on quality standards and/or customer
We are not able to 53%
experience (52%; Global:39%), as well as the more- innovate effectively 48%
than-expected rise in people costs (50%; Global:47%)
which would understandably weigh on business
Our quality standards 52%
competitiveness. and/or customer
experience are impacted 39%
On a territory scale, Hong Kong executives are feeling
the most “pain” from the talent shortage in the area of 50%
Our people costs are
pursuing market opportunities (57%; Mainland China: rising more than expected 47%
29%) and meeting growth targets (57%; Mainland
China: 29%), much more so than their Mainland China
We are unable to pursue 35%
counterparts.
a market opportunity 32%

We are missing 35%

our growth targets 35%

We cancelled or delayed 16%

a key strategic initiative 16%

There is no impact on 3%
my organisation's growth
and profitability 8%

0% 10% 20% 30% 40% 50% 60%

China Global
 22nd Annual Global CEO Survey China Report 44

The public sector has also recognised the issue and doing
In response to the skills deficit, significant retraining or upskilling of the existing workforce
its fair share to ease long term supply constraints of
(53%; Global: 46%) is seen as the main lever for Chinese business leaders to narrow if
STEM talents in the AI arena, albeit slowly. In April 2018,
not close the skills gaps, followed by hiring from competitors (20%; Global: 14%). Other
the Ministry of Education unveiled a five-year university-
viable options to close the potential skill gap included hiring from outside the industry
level AI training program to meet the growing demand for
(12%; Global: 18%), establishing a strong pipeline direct from education (9%; Global:
AI professionals. The program, which entails subjects like
17%), as well as changing composition of workforce between permanent and contingent
AI theory, machine learning, deep learning, and computer
(7%; Global: 5%).
vision, aims to supply at least 500 teachers and 5,000
students in AI-related fields at top universities over the
next five years.24

Figure 21 Meanwhile, in September 2018, National Development and

Executives’ view on the most important factors to close a potential skills gap in their organisation
Reform Commission (NDRC) urged the government to step
up the development of the country’s US$3.8 trillion digital
economy as it expects big data and artificial intelligence to
53% be the big drivers in job creation in the coming years.25 It
Significant retraining
/upskilling will also encourage more workers to switch to jobs in the
46%
new digital economy as a means to step up the digital
transformation of traditional employment sectors.
20%
Hiring from competitors
14%

12%
Hiring from outside my industry
18%

Establishing a strong 9%
pipeline direct from education 17%

Changing composition of workforce 7%

between permanent and contingent 5%

0% 10% 20% 30% 40% 50% 60%

China Global
 22nd Annual Global CEO Survey China Report 45

Conclusion
 22nd Annual Global CEO Survey China Report 46

Looking back over the past five years, the top global Policy makers in China have been active in engagement In addition to these initiatives, educating the next
trends which Chinese CEOs believe have transformed and dialogue with the business to foster open and generation workforce to thrive in the AI led economy is as
their business are technological advances (78%), shift in practical information exchange to enhance understanding much a challenge for educational institutions and
global economic power (74%) and urbanisation (51%). of the new emerging business models and new economy governments as it is for businesses. This is an opportunity
trends. In November 2018, President Xi invited China’s for private and public sectors to work together to augment
Competing in an open global marketplace with trends top entrepreneurs to dinner to assure them of a level each other’s efforts to scale solutions: providers of
toward more closed national policies is complicated. playing field where they would benefit from the education need to pragmatically upgrade their human
Changes to national policies are a risk all CEOs have to establishment of fair, open and transparent market rules capital training to prepare a skilled workforce with high
account for and finding good local partners who can guide and a law-based business environment. emotional intelligence so that organisational and
through localised issues and being flexible to economic growth is not constrained by unskilled human
accommodate policy changes are key. Further, from the various initiatives last year and the capital.
Central Economic Work Conference (CEWC) in December
In order to overcome macroeconomic threats such as 2018, it can be seen that the top leadership in China is Navigating the challenges of the complicated environment
trade conflicts, policy uncertainty and uncertain economic already updating policy frameworks, harmonising at home and abroad in a managed way, China’s long term
growth, businesses are already focused on the standards and regulations to promote properly functioning aspirations to turn itself into a moderately prosperous
opportunities in the growth sectors in the domestic market markets. From the CEWC, it emerged that: society are bright.
and have adjusted their supply chain and sourcing
strategy to protect against country-specific risk. In order to • Direct financing will be more accessible and affordable
respond to emerging investment and consumption needs for the private sector and small businesses.
of a population with rapidly rising disposable income and
investable assets, the business segment would benefit • More policy and tax incentives will be implemented to
from cultivating demand for value added products and promote the Regional Comprehensive Economic
services. Businesses would also benefit from realising Partnership, Special Economic Zones as well as the
the importance of having proper risk control and data Greater Bay Area.
governance to build trust with customers. Beyond stricter
• Optimising regional trade and investment with Belt and
government regulations, it becomes imperative for
Road countries, Asia Pacific and European Union
businesses to exercise prudence and care throughout
countries through further building economic and
data generation life cycle to build trust on the data front.
political ties will be promoted.
 22 nd Annual
22nd Annual Global
Global CEO
CEO Survey
Survey China
China Report
Report 47

Research Methodology

The top three sectors in the Mainland China sample were Communications, Entertainment and Media (15% of total
Asset and Wealth Management (14%), Industrial executives), Retail and Consumer (14% of total
Manufacturing (13%) and Technology (10%), whereas the executives) and Industrial Manufacturing (11% of total
top three sectors in the Hong Kong sample were Asset executives). Segmenting firms by revenue: 13% of the
and Wealth Management (19%), Business Services (16%) sample firms post annual revenue up to US$100 million,
and Banking and Capital Markets, other Financial 34% of the sample is constituted of firms that post annual
Services as well as Retail (9% each). revenue between US$101 to 999 million; 41% of the
sample firms post annual revenues between US$1 to 10
Sample composition in the aggregated sample were billion and 9% of the sample companies have revenues of
primarily distributed among four main sectors: Financial more than US$ 10 billion.
Services (30% of total executives), Technology,

Figure 22 Figure 23
Distribution of overall China sample by sector, 2019 Distribution of overall China sample by revenue, 2019 (US $)

Financial services Less than $100 million

9% 13%
3% Technology, communications, entertainment & media
5% 30%
Retail & consumer
6% $101 - $999 million 34%
Industrial manufacturing
7% Energy, utilities & mining
$1 - $10 billion 41%
Business Services
11% Engineering & construction
15% More than $10 billion 9%
14% Pharmaceuticals & life sciences
Others*
Not disclosed 3%

*Others include agriculture, chemicals, forest, paper & packaging, government/public services, 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
hospitality and leisure, metals, other CIPS, transportation & logistics
 22nd Annual Global CEO Survey China Report 48

In terms of the POE and SOEiv composition of firms in the firms with some level of government ownership or backing
sample, a majority of the firms in the Mainland China and accounted for 36% of Mainland China’s sample and 25%
Hong Kong sample were privately-owned: 60% of the of the Hong Kong sample, compared to only 14% of the
executives in Mainland China surveyed represented global sample.v
private firms, compared to 75% in the Hong Kong sample
and 59% in the global sample. Second, among privately- This leads to the inference that the Mainland China and
owned firms, partnerships represented 22% of Mainland Hong Kong sample is represented by privately-owned
China’s sample and 25% of Hong Kong sample, firms which are more likely to be private equity backed in
compared to 12% of the global sample; owner-managed Mainland China but more family run in Hong Kong.
firms represented 19% of Mainland China’s sample and
iv. POErefers to privately-owned enterprises and SOE refers to
21% of Hong Kong sample, compared to only 18% of the
state-owned enterprises
global sample; family run firms represented 23% of
Mainland China’s sample and 33% of the Hong Kong v.Please note that there could be an overlap between privately-
sample compared to 26% of the global sample. Finally, owned companies and companies with some level of government
ownership and hence, the total of the two segments in the sample
compositions is not 100%.

Figure 24 Figure 25 Figure 26

Distribution of overall China sample by ownership, 2019 Distribution of overall China sample by private ownership, 2019 Distribution of overall China sample by government involvement, 2019

2%
19%
31% Private equity backed
34%
38% Publicly listed Family run Yes

Privately owned Partnership

No
62% Owner managed
23% 66%
Other

25%

[Note: Not all figures add up to 100%, as a result of rounding percentages and exclusion of ‘neither/nor’ and ‘don’t know’ responses.]
 22nd Annual Global CEO Survey China Report 49

Acknowledgements and thanks to reviewers

Special thanks to Frank Lyn for his contributions to the report.

Editorial and Writing Project Management Design Team

Sanjukta Mukherjee Terrance Lui Stephen Chow
Terrance Lui Monica Uttam Venus Guo
Monica Uttam

Contact
Frank Lyn
PwC China & Hong Kong Markets Leader
+86 (10) 6533 2388
frank.lyn@cn.pwc.com
 22nd Annual Global CEO Survey China Report 50

Endnotes

1. World Economic Outlook Update, January 2019, 10. US-China trade war prompts rethink on supply chains, 21. China AI Development Report 2018, 2018,
https://www.imf.org/en/Publications/WEO/Issues/2019/01/11/weo September 2018, https://www.ft.com/content/03e4f016-aa9a- http://www.sppm.tsinghua.edu.cn/eWebEditor/UploadFile/Executi
-update-january-2019 11e8-94bd-cba20d67390c ve_susmmary_China_AI_Report_2018.pdf

2. Hong Kong stocks, currency slip on growing pessimism over 11. Paying Taxes 2019, November 2018, 22. China working-age population shrinks, presenting pitfall for
economy, October 2018, https://www.pwccn.com/en/services/tax/publications/paying- pension plans, February 2018,
https://www.scmp.com/business/money/stock- taxes-2019.html https://www.reuters.com/article/us-china-economy-
talk/article/2166909/hong-kong-stocks-currency-slide-growing- population/china-working-age-population-shrinks-presenting-
12. 2018 APEC CEO Survey - China Report, November 2018,
pessimism-over pitfall-for-pension-plans-idUSKCN1GC18C
https://www.pwccn.com/en/research-and-insights/apec-china-
3. Alibaba sets record US$30.8 billion for Singles’ Day sales, 2018.html 23. Number of Students of Formal Education by Type and Level,
underscoring resilience in consumer spending, November 2018, 2018,http://www.moe.gov.cn/s78/A03/moe_560/jytjsj_2017/qg/20
13. Global M&A volume drops in third-quarter as trade tensions
https://www.scmp.com/tech/enterprises/article/2172523/alibabas- 1808/t20180808_344698.html
loom, September 2018, https://www.reuters.com/article/us-
singles-day-sales-hit-1-bln-yuan-less-60-seconds
global-m-a-q3/global-ma-volume-drops-in-third-quarter-as-trade- 24. Shortage of top AI talent means graduates are writing their own
4. China’s next retail disruption: End-to-end value chain digitisation, tensions-loom-idUSKCN1M801D paychecks, November 2018,
June 2018, https://www.pwccn.com/en/industries/retail-and- http://www.globaltimes.cn/content/1129373.shtml
14. What China-US trade tensions mean for Chinese economy and
consumer/publications/global-consumer-insights-survey-china-
business?, August 2018, https://www.pwccn.com/en/research- 25. China aggressively pushing big data and AI to drive new job
report.html
and-insights/china-us-trade.html creation, September 2018, http://hrmasia.com/china-
5. More reform to encourage innovation, December 2018, aggressively-pushing-big-data-and-ai-to-drive-new-job-creation/
15. 2018年1-8月我对“一带一路”沿线国家投资合作情, September
http://www.chinadaily.com.cn/a/201812/06/WS5c085d4ba310eff
2018,http://www.mofcom.gov.cn/article/tongjiziliao/dgzz/201809/
30328f56c.html
20180902790254.shtml
6. China Economic Quarterly Q2 2018, August 2018,
16. Fresh moves announced to spur economy, December 2018,
https://www.pwccn.com/en/research-and-
http://www.ecns.cn/news/economy/2018-12-24/detail-
insights/publications/ceq-q2-2018/china-economic-quarterly-aug-
ifzaxhck8716520.shtml
2018.pdf
17. Yirendai, China’s largest P2P consumer finance platform,
7. Xi Jinping tries to give private business a ‘confidence boost’ as
expands beyond lending, November 2018,
economic slowdown bites, November 2018,
http://www.theasianbanker.com/updates-and-articles/yirendai-
https://www.scmp.com/economy/china-
lessons-from-the-largest-digital-p2p-player-on-the-planet
economy/article/2171267/xi-jinping-tells-chinas-private-business-
owners-you-can 18. Jack Ma's Ant Financial adds two new money market funds to its
platform, May 2018, https://www.reuters.com/article/us-ant-
8. Key meeting charts course for China's economy in 2019,
financial-funds/jack-mas-ant-financial-adds-two-new-money-
December 2018, http://www.ecns.cn/news/economy/2018-12-
market-funds-to-its-platform-idUSKBN1I5085
24/detail-ifzaxhck8716561.shtml
19. Report: China Busiest in Mapping AI Patents, August 2018,
9. Embracing the New Era: A new chapter of Opening-up in China’s
http://english.sipo.gov.cn/news/officialinformation/1126845.htm
Financial Sector, May 2018, https://www.pwccn.com/en/financial-
services/publications/embracing-the-new-era-financial-sector.pdf 20. The 2018 Global Innovation 1000 study, 2018,
https://www.strategyand.pwc.com/innovation1000
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