Editor’s note: The World Economic Forum is held in Davos, Switzerland from Jan 17 to 20. The prospects of the Chinese economy and how it will intertwine with the global economy against the backdrop of increasing uncertainties are among the topics discussed at the forum. We interviewed 18 chief executives from leading multinational companies to share their outlook on China as well as their corporate strategies in 2017. China Daily has published three full-page special reports of the executives’ views this week.
1. What’s your expectation for China’s economic growth in 2017? What are the major opportunities and challenges for China?
2. How would you align your business strategy with the main themes of China’s 13th Five-Year Plan like innovation, upgrading of manufacturing capability, green growth and urbanization?
3. What are your expectations with regard to 2017 revenue and profit of your business in China?
4. What kind of impact will a stronger US dollar and a more flexible renminbi exchange rate have on your business in 2017?
5. Do you plan to increase your investment in China?
Celina Chew, president of Bayer Group Greater China
A1 China has set 2020 as the target to realize the “centenary goal” of building a moderately prosperous society. This involves doubling both its 2010 GDP and the 2010 per capita income of urban and rural residents. In order to do this, China must maintain medium-to-high rate of economic growth from now until 2020, while prioritizing better quality and more sustainable growth. I expect the government will work to ensure that economic growth in 2017 contributes to this centenary goal. In this regard, an opportunity is the “comprehensive health” concept as well as the “healthy China 2030” blueprint which covers public health services, environment management, the medical industry and food and drug safety. This provides opportunities for industries to contribute. One challenge will be the implementation of reforms.
A2 The main themes of the plan are very much in line with Bayer’s philosophy and mission, and our strategy for China. Bayer’s development plan in China, as well as globally, is centered on innovation. Innovation has been a key contributor to Bayer’s success over 150 years, and will continue to drive its growth. We are also upgrading our manufacturing capabilities. For example, we recently inaugurated the 100 million euro expansion of our pharmaceutical production site in Beijing.
A3 Bayer’s global results have shown strong earnings growth for year to date Q3 2016, with an excellent performance from our pharmaceuticals business and contributions from our consumer health and crop science businesses. Our business here has contributed to our global results and Greater China is still the third largest market for Bayer. We are well-positioned to ensure that Greater China will continue to have a positive input for Bayer Group results in 2017.
A4 The stronger US dollar will have a limited impact on Bayer’s business in China in 2017 as most of our foreign exchange-related operations are denominated in euro.
A5 China is a key market for Bayer and a driving force for our growth. China is also a major focus of our global strategy. Bayer has invested in China over many years, not only in terms of local production sites for all three of our business divisions (pharmaceuticals, consumer health and crop science) and the acquisition of Chinese businesses, but also in a professional and talented organization. We will continue to invest in China.
Alain Dehaze, CEO of Adecco Group
A1 I am cautiously optimistic. China’s leaders want to replace an investment-driven economic model with sustainable growth driven by domestic consumption and services, but growth has slowed faster than expected.
For opportunities, if Beijing can maintain the gentle speed of slowdown — called a “soft landing” — rather than a disruptive one, it is more likely to deal well with inequalities that are products of that growth, boosting standards of living in an environment-friendly environment.
A2 The plan can be divided into four major themes: secure a middle-high economic growth target; shift the emphasis from investment and exports to domestic consumption; enhance individual well-being through social welfare; and implement structural and healthcare reforms.
One development in China now is that the internet is revolutionizing almost everything. To cater to this trend, we joined hands with Ant Financial Services Group and FESCO Group to establish WoWooHR — a SaaS-based human resources service platform. WoWooHR combines both online and offline knowledge, which allows it to provide “internet plus HR” services.
A3 The world is becoming increasingly volatile. Brexit, terrorist attacks, elections in major countries and the refugee crisis are putting pressure on the global economy. As a part of it, China can hardly be immune to its impacts.
China’s economic growth is projected to moderate slightly in 2017. Despite this trend, our joint venture in Shanghai is growing. Now we have 600,000 associates and 10,000 clients in China. As a player in China, we believe FESCO Adecco will again outperform the market in 2017.
A4 I can hardly say that we will not bear the brunt of a stronger dollar since human resources is a cyclical business bonded with the macroeconomic environment. Generally, I believe this is largely a beneficial process.
In the short term, a rising dollar will impact the earnings of US companies with large foreign operations. A number of them are our clients. A higher dollar contributes to cutting the dollar value of international revenues. But in the long run, this should lead to a healthier, more balanced global economy.
A5 Last April, we acquired a company called Person. This will help us to accelerate recruitment activities in China. One month later, our fifth JV company in China with FESCO Group was established in Suzhou, Jiangsu province. In November, we signed a joint venture agreement with Ant Financial Services Group and FESCO Group to establish WoWooHR — a SaaS-based human resources service platform.
In order to play a bigger role in China, we are willing to increase our investment and we are open to partnering with companies to leverage shared expertise across different areas.
Neil Harvey, CEO, Credit Suisse, Greater China
A1 We think China is likely to maintain its GDP growth rate above 6.5 percent. The main opportunities will likely come from recovery in export growth and growth in infrastructure investment. There could be challenges. And there is the risk of capital outflow in light of US interest rate hikes and the renminbi’s depreciation, though we think this will be managed by the People’s Bank of China. The US president-elect remains a source of uncertainty. His departure from traditional practices in terms of US foreign policy could create surprises.
A2 As the government seeks innovation in financial markets, Credit Suisse will bring our product expertise in hybrid instruments, high-yield bonds, derivatives and other innovative financial products to China.
We will continue to expand our onshore presence and enhance our capability in acting as a bridge in bringing international capital to help fund China’s growth and financial market innovation. As China moves with the internationalization of the renminbi, we will leverage our global network to facilitate the move.
A3 As Chinese companies play a role in the growth of the Asia Pacific region, we expect to see demand for financing and advisory services from our Chinese ultrahigh net worth individual and entrepreneur clients. We will continue to invest in our onshore China franchise in order to serve this client base.
In November 2016, we launched our domestic A-share brokerage business. With the contribution from this business and our efforts to expand our private banking capability, we expect revenue and profit contribution to rise in the medium to long term.
A4 We have seen a mixed impact on client activity in the region as a result of a strong dollar and more flexible renminbi. Some clients have been diversifying out of local currencies and buying US dollar assets. We expect the Shenzhen and Shanghai-Hong Kong Stock Connect links to become more active as Chinese mainland investors diversify their portfolios into HK dollar assets. Some clients have become more cautious as borrowing costs increase.
Overall, we expect to grow our business as clients look for more ways to manage their liquidity, raise capital and hedge financial risks amid market and currency volatility.
A5 We will continue to expand our onshore capability through hiring talent and working with local partners. Most recently, we hired Rick Meng, head of private banking for Credit Suisse in China, to build an onshore wealth management team.
We believe our ability to provide expertise and onshore access to the domestic capital markets in China differentiates us from our international peers. We aim to offer our clients an integrated onshore and offshore offering that combines our private banking and investment banking product expertise.
Werner Steinmueller, CEO Asia Pacific, Deutsche Bank
A1 Despite global uncertainty, China has maintained stable GDP growth through the first nine months of the year and annual growth is on track to meet targets. We expect China to make progress in controlling broad credit growth, tightening the property market, and implementing reforms in coming quarters.
In the long run, there should be more focus on restructuring to accommodate a “new normal” of economic growth. This is no doubt a transition that will take many years, but with monetary and fiscal policies the authorities will be able to ensure stable growth and employment.
A2 We will continue to work with companies and investors to support market reform, and our goal is to remain a key component of a virtuous cycle, one in which market development leads to new opportunities for Deutsche Bank, and in turn our participation contributes to the depth, breadth, and best-practice standards of the local market and economy.
More broadly, the story of an emerging middle class in China is still unfolding. Private consumption proxies such as retail sales and property market data show us that household balance sheets are very resilient. Urbanization means there will be demand for social services and clean energy in cities across the country, presenting opportunities for companies and their financial partners.
A3 Deutsche Bank is delivering solid performance across Asia, and China is no exception. Our platform in China, which benefits from a long local history of over 140 years across transaction banking, capital markets and wealth management activities, is well-positioned for success.
In addition to Deutsche Bank’s presence onshore, it is important to understand that a core part of our business and an area we excel at is serving Chinese clients outside of China. With our network and comprehensive product set, we help our clients solve the challenges they face.
A4 What’s critical for us is the opportunity that comes with the continued internationalization of the renminbi. With our leadership in foreign exchange markets, we are uniquely placed to play a pioneering role in the currency’s global development, and will continue to do so in 2017 and beyond. The transformation of China’s economy will encourage more multinationals and financial institutions to transact payments, make investments, and hold reserves in renminbi. We are already seeing the stronger influence of the renminbi vis a vis the US dollar within the region, and expect this to continue. In addition, liberalization will increase foreign investors’ participation in onshore capital markets and adoption of the renminbi as an investment currency.
A5 As China continues to reform and integrate with international capital markets, we see growth opportunities in virtually every one of our key business areas. One of the biggest is the trend of Chinese enterprises investing overseas. Equally, with greater market access and future index inclusion, foreign investors are keen to increase their share of renminbi assets. To facilitate this, we will continue to enhance and expand our capacity in transaction banking and capital markets, leveraging our global network and expertise to provide cross-border banking services.
Elaine Chang, vice-president of Amazon and president of Amazon China
A1 We are optimistic about China’s economic prospects in 2017 and believe cross-border e-commerce will play a key role in China’s economic growth in 2017. The “import” of international brands and products through cross-border online shopping supports the government’s “supply-side structural reform”. On the other hand, China-based manufacturers are trying to grow their businesses through cross-border e-commerce. All these are opportunities and what we need is to focus on customers’ demands and drive local innovation.
A2 Our mission in China is to innovate. We launched Amazon Global Store, the first localized global store in Amazon worldwide; Amazon Prime China, the first membership program providing unlimited and free cross-border delivery; and white Kindle, initiated by Amazon China for Chinese customers first.
Additionally, Amazon Global Selling recently launched a number of initiatives in China, including a China-based recruitment team designed to bring high quality China-based sellers to the Amazon Business marketplace in the US and the “Manufacture plus” project to support China’s manufacturers to explore the online channel to export.
A3 Amazon has a long-term commitment in China and will continue to innovate. So long as we serve our customers right, everything else will follow.
A4 Currency exchange rate fluctuations are normal. Given that we are a global business, the fluctuations normalize if we consider our global scale.
A5 China is one of our strategic markets and we are committed to growing here. We have invested to build a presence in China, including cross-border e-commerce, Amazon reading including books, Kindle and digital content, Amazon Logistics+, and Amazon Web Services.
Yoke Loon Lim, president of Dow Greater China
A1 The government has shifted economic growth into a slower lane, which helps ensure its quality and sustainability. The government is calling for a higher level of technology and innovation, industrial upgrading, and environmental protection, which will bring more opportunities to industry leaders like Dow.
Sustainable urbanization is a challenge for China, yet it’s also an opportunity. To attract and support the 300 million Chinese expected to move to cities in the next two decades, China will need clean air, quality water, comfortable houses and healthy and abundant food. If China can make it, that would be a great upgrade of its industries. A commitment to sustainable growth can be good for the environment, good for people and good for business ... all at the same time.
A2 At the core of China’s growth priorities are economic transformation and sustainable urbanization — concerns that we are familiar with at Dow. Dow’s technology-driven and market-focused portfolio closely aligns with China’s plan on economic and social development priorities. Our strategy is to accelerate growth by focusing on key markets, develop solutions to address needs from areas such as energy, transportation, infrastructure, sports, and home and personal care. We see business opportunities in China’s transformational journey as we support the endeavors of the government and our customers.
A3 Globally, Dow has achieved 16 consecutive quarters of year-over-year operating earnings growth, during which time Dow has also delivered three consecutive years of volume growth. Dow Greater China has been a contributor to this global success. In 2015, we delivered a strong volume growth of 10 percent, which represented the highest volume growth among Dow markets worldwide. We remained on the growth track in 2016, and will continue this momentum as we move into 2017.
A4 A stable foreign-exchange system which reflects the market will benefit the business community in the long run. In China, Dow’s business focuses more on our value to customers, to industry and to the Chinese economy through our solutions and expertise. This makes Dow less vulnerable to market volatility, industry cycles and economic uncertainty.
A5 Dow has continued to invest in China over the years. We are doing business in China with a long-term view — strengthening our local innovation, manufacturing and service networks so as to be better positioned to serve the China market. In 2016, we invested in two new facilities in China — an advanced coating materials plant in Chengdu and an agro-science plant in Zhangjiagang, Jiangsu province, for local manufacturing of herbicides. In the future, Dow will continue to evaluate and invest to expand our manufacturing, innovation and operational networks in China. We expect our growth from the ongoing development of our core businesses, which are aligned with the government’s economic and social development priorities.