Resilience and digital readiness in a trade- …...digital economy Self-assessed performance in building artificial intelligence into products over the last two years 2018 APEC CEO

APEC CEO Summit:

Port Moresby, Papua New Guinea, 15-17 November 2018

Resilience and digital readiness in a trade-disrupted worldPwC’s 2018 APEC CEO Survey China Report

PwC |

About PwC’s APEC CEO Survey

www.pwccn.com/en/research-and-insights/apec-china-2018.html 2

All 21 APEC

economies represented

85% of respondents

Are key decision makers

37% in businesses with at least

$US1 billion revenue

PwC |

• Official release on 15 November at the APEC CEO Summit 2018

• Online survey completed between 10 May to 16 July

• Survey conducted for the 9th time

• Produced by PwC as Knowledge Partner

“

PwC | 3

• The global trade environment is in a state of flux.

• The prevailing trade rules were being challenged and old business models were being displaced by new thinking.

• Despite all the economic jitters, Chinese companies at large have quickly reassessed the situation and demonstrated resilience in coping with the new host of challenges.

• This year we rescanned the environment to test the validity of the trade rhetoric and what has really changed in the minds of business leaders.

“Introduction

PwC | www.pwccn.com/en/research-and-insights/apec-china-2018.html

PwC |

2013 2014 2015 2016 2017 2018

50%

40%

30%

20%

10%

0%

Business confidence and investment subdued by strong trade headwinds

4

2018 APEC CEO Survey – China report

China - Very confident APEC - Very confident

China - Not very confident APEC - Not very confident

Key measures of Chinese executive optimism showing responses for “very confident” on future revenue growth

www.pwccn.com/en/research-and-insights/apec-china-2018.html

PwC |

Business confidence hinges on the perceived condition of global trade environment

5


0%

10%

20%

30%

40%

An increase in

revenue opportunities

due to a new bilateral

trade arrangement

A loss in revenue

due to a stalled or

collapsed trade

arrangement

An increase in barriers

to moving goods

across borders


to providing or

receiving services

across borders


to investing in another

economy (constraints

on FDI, M&A)

APECChina

Percentage of Chinese executives who expect to experience the following in the global trade environment in the next 12 months


PwC | 6

While global investment is dented, Chinese firms are resilient to disruption by resetting their investment footprints in APEC


Future investment intent Future investment allocation to APEC and

rest of the world

51%

Stay the same

46%

Increase

3%

Decrease

25%

Rest of the word

75%

APEC


PwC |

39%

44%

44%

45%

46%

36%

44%

45%

46%

47%

7

Top APEC economies to receive increased cross border investment over the next 12 months (net increase)

Viet Nam

People's Republic of China

The United States

Australia

Thailand

2018

Viet Nam

People’s Republic of China

Indonesia

The United States

Thailand

2017

China maintained its second ranking as the most attractive destination for planned increases in cross-border investments



PwC | 8

Government initiatives unveiled new growth opportunities2018 APEC CEO Survey – China report

0%

10%

20%

30%

40%

50%

60%

Riskassessment

CommercialViability

assessment

M&As Increase frequency of review of our organisation’s strategies and operations to

increase alignment

Prioritise making

greater use of data and IP assets

Develop new products and

services

Identify localPartners for risk sharing

Focus onBuildingbrand

RaiseInvestments in new and emerging

technologies

Don’t’ know

ChinaAPEC

Activities Chinese firms plan to undertake over the next 2 years to capitalise on initiatives by Chinese government


PwC | 9

Chinese executives perceive strong competition in developing digital maturity

In line with our competitorsFall behind our competitors Highly competitive

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

Managing data risks

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

Skills and development

of workforce

Operations

Data infrastructure

Digital customer

interactions

Development of digital

products

ChinaAPEC

How Chinese firms assess their digital capabilities against the competition



PwC |

Majority of Chinese CEOs believe the government should do more to train on STEM

Believe their government

should do more to train STEM

professionals

10

Believe their government

is doing enough to train STEM

professionals

61%

8%


PwC | 11

Chinese companies are reprioritising investments to drive digital capabilities

7%

33%

41%

15%

Highly

competitive

In line with

our

competitors

Not making

use of AI

technologies

Fallen

behind our

competitors

Priority areas to improve for China to further advance in the

digital economySelf-assessed performance in building artificial intelligence into

products over the last two years


Raising standards for data and privacy protections

Availability of digital ready talent

Improvement to digital infrastructure

Reducing barriers to foreign entrants

Developing the digital business sector

More people participating in the digital economy

Investments in cyber defences, public and private

1

2

3

4

5

6

7


PwC | 12

CEOs see supportive factors across APEC for fast-growth start-up success beyond the US and ChinaName an economy with the right conditions to spark the next unicorn start-up, beyond the US and China

31%

28%28%

24%23%

Republic of Korea

21%

CanadaAustralia

Hong Kong, China Japan

Singapore

PwC |

Hong Kong as an

ecosystem to spur

the next wave of

unicorn growth



PwC | 13

Business models need to keep pace with data transfer regulations

(APEC Overall: 20%) perceived an increase

in barriers to moving data across borders in

the next 12 months, when conducting their

cross-border business activities.

28%


PwC | 14

0 5 10 15 20 25 30 35 40

Emerging tech is set to create more jobs than displaced, although filling them with the right talent remains a challenge

9%

13%

19%

30%

34%

31%

22%

17%

7%

14%

We are reducing headcount

No change to headcount BUT

substantial changes to our

employees' roles

No change to headcount and minimal

change to our employees' roles

We are creating more jobs BUT

struggling to fill the roles with the

people/skills we need

We are creating more jobs and filling

them successfully

ChinaAPEC



PwC | 15

10th

Expanded worker protections

Raising minimum wages

Expanded access to high-quality education at all levels

Expanded access to healthcare

Greater economic incentives for savings and access to financial service

No contribution Strong/moderate contribution

Infrastructure

81%

68%

64%

58%

56%

57%

53%

50%

74%

71%

16%

22%

25%

25%

27%

34%

37%

36%

39%

43%

Services

Progress in education and transportation are pivotal to advancing inclusive growth

Improved transport

More affordable high-speed internet access

More reliable access to power and electricity

Improved access to water and sanitation

More stable food prices



PwC |

For policy makers:

• The trade debate has prompted China to revisit its international relations and economic ties within and beyond APEC.

• Growing the domestic market is a long-term remedy to trade protectionism. Policy makers should buy time to deepen structural reforms to stimulate aggregate demand

• Government support is the key determinant in driving forward the digital agenda for the private sector.

16

For business leaders:

• Businesses must be alert to their vulnerability in the global value chain and prioritise resources to accelerate the pace of industrial upgrading.

• Digital transformation and adoption of emerging technologies are crucial to driving competiveness in businesses, so is the speed at which digitisation is taking place.

• Domestic businesses are encouraged to venture outward for growth opportunities arising from new bilateral and multilateral agreements, and capitalise on government led initiatives

What are the key implications?2018 APEC CEO Survey – China report


PwC | 17

Gender

22%20%

56%

US$2.5 bn or moreUS$500 m < US$2.5bn< US$500 m

Revenue

15%

85%

Head of department or business unitExecutive at the highest decision-making level

Principal role

Sector

FSIndustrial Consumer OtherTech

39%29% 21%21% 17%21% 8%

Professional Services

12% 9%116% 84%

Profile of survey respondents in China2018 APEC CEO Survey – China report


PwC | 18

We surveyed industry leaders from 10 May to 16 July 2018 for PwC’s 2018 APEC CEO Survey.

We used an online and paper methodology to achieve 1,189 valid responses from CEOs and industry leaders,

with responses scored from each of the 21 APEC economies. The 21 APEC member economies are:

Australia, Brunei Darussalam, Canada, Chile, People's Republic of China; Hong Kong, China; Indonesia,

Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, The Philippines,

Russia, Singapore, Chinese Taipei, Thailand, The United States and Viet Nam.

This multilingual survey was made available in six languages: English, Simplified Chinese, Vietnamese,

Japanese, Korean and Spanish.

Responses to the survey were given on a confidential and unattributable basis.

Note: Not all figures add up to 100% due to rounding.

Methodology2018 APEC CEO Survey – China report


Contact us

Frank LynChina and Hong Kong Markets [email protected]

www.pwc.com/APEC

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the

information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or

completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do

not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information

contained in this publication or for any decision based on it.

© 2018 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of

PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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Resilience and digital readiness in a trade- …...digital economy Self-assessed performance in building artificial intelligence into products over the last two years 2018 APEC CEO