The chief executives of China-headquartered companies are prioritising innovation to drive growth and have highlighted it as one of their top strategic priorities, ahead of their global counterparts, a KPMG report reveals.
The report, titled '2016 China CEO Outlook–Now or Never' and released on Wednesday, features the China-specific findings from a global KPMG CEO report, which interviewed 1,268 CEOs worldwide, including 129 from China.
Despite operating in different industries, one common theme emerged among the responses from chief executives in China: innovation will be a crucial driver of growth over the next three years.
Almost half of the Chinese respondents placed "fostering innovation" as one of the top three strategic priorities for their companies over the next three years–compared to just 21 percent of overseas CEOs. In addition, 92 percent of the Chinese respondents believed it was important to include innovation in their business strategy, with 47 percent placing innovation at the top of their personal agendas – compared to 23 percent globally.
"Despite today's global geo-political uncertainty and disruptive market and social forces, the CEOs in our survey are focused on growth, by strengthening their capabilities today and readying their businesses for a very different future, through transformation, advanced technology and more specialized talent," said KPMG International chairman John Veihmeyer.
"Nowhere is this more evident than China, where CEOs are especially confident about the prospects for growth and recognize the importance of creating a culture of innovation, and collaboration."
According to the survey, half of the Chinese respondents viewed "new products" as the primary source of growth over the next three years. In addition, China's chief executives identified "new product development", "increasing data analysis capabilities" and "Internet of Things, machine-to-machine technology, Industrial internet or other aspects of technology" as the top three focus areas for further investment in the next three years.
"In a rapidly evolving and vibrant market like China, CEOs need to think about innovating and adapting their business models to ensure their products and services are attractive to a growing consumer market," said KPMG China co-chairman Honson To.
The survey results underscore China's transition from an investment-intensive, export-led growth model to one driven by consumption and innovation. The findings are also consistent with the recently-released 13th Five-Year Plan, where innovation is identified as one of five new tenets of China's economic and social development, around which policies will be designed and implemented during 2016-2020.
"Through the use of disruptive technologies such as cloud computing, the Internet of Things, smart industrial robotics, Data & Analytics and enhanced automation, Chinese companies will be able to not only respond to the changes brought by China's economic restructuring, but will also be able to capture business opportunities derived from it," said KPMG co-chairman Benny Liu.
Separately, the global view of the world's growth potential has shifted since 2015. While the U.S. was identified as the region with the greatest growth potential last year, this year's survey shows the world's chief executives view India (with 38 percent) and China (35 percent) as the most attractive markets for new market growth over the next three years.
At the same time, about two-thirds of Chinese chief executives regard China as the market with the greatest potential for growth, followed by ASEAN (37 percent) and the U.S. (33 percent). Fifty three percent said they would pursue new partnerships and alliances to accelerate the execution of business strategy – a significantly higher percentage than for peers in other countries.
Meanwhile, China's CEOs highlight emerging technology and strategic risks among the key issues they are most concerned about, while worries over whether or not their company's products or services will in fact be relevant three years from now weigh heavily. Finding the right talent in strategic priority areas of cyber, Data & Analytics, digital, innovation, and Corporate Social Responsibility is another pressing issue.
