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Glimpses of China’s economy over next 5 years

Updated: Nov 10,2015 7:36 AM     China Daily

The Fifth Plenum, a key meeting of the Communist Party of China, was held last month. At the meeting, top Chinese leaders reviewed and deliberated on the draft of the 13th Five-Year Plan (2016-20), which will lay out the blueprint of the country’s social and economic development over the next five years. The plan highlights innovation, green growth and reform of State-owned enterprises as some of the country’s development priorities. China Daily invited a group of chief executives from leading multinational companies to provide their insights into the plan.

Q1: Innovation was one of the key areas emphasized by China’s leaders at the Fifth Plenum. Why is this crucial for the country’s growth prospects and how will it affect the overall economy? How will this affect your development plan in China?

Q2: Green growth was another vital theme highlighted at the Fifth Plenum. How will tackling pollution and raising environmental standards affect China’s future development and shape your business strategies in China?

Q3: China is targeting “medium-to-high economic growth” in the coming five years and aims to double its 2010 GDP and per capita income by 2020. Premier Li Keqiang has pledged to maintain GDP growth rate of at least 6.5 percent through to 2020. Is this realistic? If not, what would be your figure?

Q4: How can China achieve its goal of pursuing sustainable growth during the next five years?

Q5: China’s leaders will continue economic reform by opening up markets. Will reduced restrictions help foreign companies play a greater role in boosting China’s economic growth? And what sort of reforms would you like to see in this area?

Celina Chew, president of Bayer Group Greater China

A1 Innovation is an important cornerstone for sustained economic growth and prosperity, for companies as well as nations. As China moves into a new phase of development, more emphasis will be placed on encouraging mass entrepreneurship and innovation.

Innovation is crucial for China’s future growth prospects as innovation helps to create employment opportunities in terms of new jobs as well as new types of jobs. Our strategy is very much in line with the Chinese government’s aim for a “healthy China” through innovation.

A2 Our mission is “Bayer-Science for a Better Life”, and a better life would certainly include a clean and safe living environment. We believe that, in tackling pollution and raising environmental standards, China can ensure a better quality of life for the Chinese people. We are therefore very happy to see the emphasis on green growth as part of the Chinese government’s plans. Sustainability is a fundamental principle of Bayer’s business and operations. We reflect our strong commitment to sustainability, safety and health, not only in the safe and comfortable working environments that we provide for our employees, both in our offices and in our production facilities, but also in the products and solutions that we offer.

We believe our innovative solutions can help China achieve a more sustainable growth and a cleaner, safer environment.

A3 China has made clear that its target of “medium-to-high economic growth” is accompanied by the aim of achieving higher quality and more sustainable growth. This means making structural reforms, encouraging new growth engines in the Chinese economy driven by technology, innovation and mass entrepreneurship, and providing more business opportunities, while maintaining a steady growth and ensuring a better quality of life for the Chinese people. Thus far, we believe progress has been made to achieve this challenging objective.

A4 The fundamentals of China’s growth prospects are very good. China has a large population with increasing income levels with a strong desire for a better life. This means better food security and food safety, better healthcare products and services and a cleaner, safer environment.

Bayer believes that China’s shift in focus from an investment-driven and export-led economy to a consumption-driven economy with a focus on innovation and entrepreneurship, will help China achieve its goal of pursuing sustainable growth over the next five years.

This shift, coupled with the opening-up of markets, structural reforms, enhanced multilateral and bilateral cooperation, and reduced complexity and administrative hurdles will help stimulate economic growth in China and attract investment.

A5 Reduced restrictions will be a very good signal to foreign companies that China welcomes foreign investment and sees a big role for foreign companies to contribute to China’s economic growth and a better life for the Chinese people. We have enjoyed very good support from the Chinese government and its foreign investment policies. These policies have enabled us to have significant and stable operations in China so that we can also live our mission, “Bayer-Science for a Better Life”, in China by contributing innovative products and solutions.

Mark Gibbs, president of SAP Greater China

A1 As China is putting more focus on quality and sustainable growth, innovation will have a significant impact on economic development and will continue to play a pivotal role in driving industry transformation and upgrading.

Take manufacturing sector as an example-both the German and Chinese governments have pledged collaboration in driving Industry 4.0 and SAP is an early participant and active contributor. Being an innovation leader in China for over two decades, SAP expects to see new opportunities to support Chinese businesses in their digital transformation journey.

A2 SAP’s vision is to help the world run better and improve people’s lives. We do this with sustainable innovation for our customers, internal operations and the communities around the world which SAP serves. In 2015, SAP once again ranked as a global sustainability leader by the Dow Jones Sustainability Indexes for the ninth consecutive year.

SAP’s strategy is to embed sustainability across the company globally and help ensure the long-term success of customers.

In China, we are very active in collaborating with customers on smart city and smart manufacturing projects.

A3 As China is highly promoting innovation and transformation empowered by smart manufacturing, we see many new opportunities presented to SAP and we will align our strategies to China’s major government initiatives, including “Belt and Road”, “Internet Plus” and “Made in China 2025”. We see China as our second home and will continue joint innovation efforts with customers so that we become complementary to China’s IT market.

A4 We know that industry upgrade and innovation, energy saving and environmental protection, as well as internationalization are among the major focus areas for the Chinese government. We believe that these themes will drive China’s sustainable economic growth and also represent a huge opportunity for SAP.

A5 We are optimistic about the deepening of economic reforms in various sectors that encourage mass entrepreneurship and innovation. We expect to be part of the new opportunities that will come from the digital transformation and innovation journey of China’s State-owned enterprises and private companies. SAP’s global expertise and our versatile product portfolio make us well poised to help Chinese companies expand overseas.

Neil Ge, CEO of DBS Bank (China) Ltd

A1 Innovation is critical to the economic transition that China is going through as we are counting on it to become a powerful engine fueling future economic growth.

It is also key to the quality, sustainable growth we aim to achieve, which will solve the problems of overcapacity, heavy environment costs, etc, over time.

Banks are increasingly under pressure to innovate, especially in the face of rising competition from Internet players and alternative funding solution providers. DBS embraces digital and has a plan of building up our digital capabilities in China that allows us to scale up businesses without building up a very extensive physical network.

A2 We are happy to see that green growth is going to get more attention and emphasis so that the importance of clean air, conservation of nature and quality of life are increasingly recognized by all.

DBS has always been an environmentally conscious bank in that we are continuously adopting latest measures to save energy and reduce waste in our operations.

With green growth as a highlight, we will also grow our expertise in this sector to provide financial solutions that suit the needs of the people concerned. And while doing our due diligence, we will also look at companies’ environment records.

A3 Achieving at least 6.5 percent growth in the next five years is not unrealistic although it is not an easy task.

We have seen a wide range of initiatives already under way from interest rate liberalization, renminbi internationalization to relaxing the one-child policy, allowing local governments to issue bonds, setting up free trade zones, furthering SOE reforms, and so on. What’s more, the Asian Infrastructure Investment Bank and the Belt and Road Initiative were also launched on the international front.

With all these measures, and more to come, we do see the determination to forge ahead with reforms to support economic growth.

A4 The fact that a lower growth rate is now widely accepted by the government and businesses alike is already a good start for more sustainable growth ahead. This will serve as a good guidance to local governments and businesses to change their growth engines, reduce capacity, and exit from environment-unfriendly projects.

We are looking forward to more details in the 13th Five-Year Plan with proper incentives in place to support the green industries, and punishments for environment damages. This can kick-start a virtuous circle and foster the development of an ecosystem that will support new technologies and business models, which in turn, will bring about sustainable growth.

A5 Since establishing our presence in China over 20 years ago, DBS has pioneered efforts to support China’s financial reforms. We were the first Singaporean bank to incorporate locally in China in 2007, the first foreign bank to operate in the China (Shanghai) Pilot Free Trade Zone last year and (among) the first batch of banks selected to be a member bank of China’s first international payments system-Cross-border International Payment System-in October this year.

We are a major player in the offshore renminbi market, making our contribution to support renminbi to become a truly global currency. We will embrace further initiatives for its internationalization.

Stephen Shang, president and CEO, Honeywell China

A1 Innovation is not just about technology. It aims at producing meaningful outcomes that are for the benefit of the people. Innovation also requires comprehensive thinking throughout R&D, financing, marketing, manufacturing and supply chain. Eventually, innovation should bring business growth.

For businesses, they always need to look at the real needs of the specific market or country they operate in. China is in the midst of massive change, driven by rapid urbanization and industrialization, and the rise of world’s largest middle class. We believe environmental protection and energy efficiency are the most fundamental challenges and needs in this country.

China’s “new normal” actually provides technology-driven companies like Honeywell with a huge, strategic opportunity to drive a smarter and more sustainable growth through innovation.

A2 Through East-for-East strategy, Honeywell identifies those China-specific needs around safety and security, environment and energy efficiency, productivity, and other dire concerns of the population like air and water, and meets them with locally developed innovations.

From January to September in 2015, Honeywell’s Shanghai-based R&D center generated more than 700 inventions and 120 patents. This already surpassed the numbers of last year. Currently, one-third of our revenues in China come from such East-for-East innovations and products.

A3 From our perspective, we believe in China and its ability to continue to grow and evolve. That’s the reason why we have confidence in China over the long term. China is now Honeywell’s biggest country for sales outside of the US.

Those environmental and sustainability challenges China faces today are not unique for this country. What Honeywell does here and the problems we solve in China are often the solutions people need around the world. Moving forward, we expect more and more “innovated in China” products will support China’s Belt and Road strategy and accelerated efforts to “go out”-transferring China-developed innovations to the rest of the world.

A4 Going forward, we believe China will need to compete on skill and not on cost, and it is perfectly doable. For example, some of the most productive factories within Honeywell are located in China. Because of skilled labor and quality management practices, we are able to achieve very high yield. We are able to leverage the dynamic supply base to achieve cost efficiency. And we are able to integrate these into our engineering process to create local innovation.

This is an ecosystem play where China can uniquely combine the strengths of high quality manufacturing, skilled labor, and engineering talent.

A5 Over the past two-three years, Honeywell has been expanding its capacity in China in areas like turbocharger, performance materials, catalysts and adsorbents, and aerospace. These will enable us to deliver the most cost-effective solutions to our local customers in the most efficient manner. We develop our products locally and now have about 3,000 R&D engineers in China.

We will continue to invest in China but we also think China needs to open up the market and support more private businesses.

Ling Fang, managing director, China & East Asia, Alstom

A1 Innovation plays a crucial role in the economic growth of the modern world. It determines the success of the companies, as much as it determines the success of countries. Thriving innovative ideas and companies in the country will undoubtedly spur future prosperity. At Alstom innovation is a key driver for strategic growth and differentiations. Innovation is part of our strategy for successful operation in China. For example, to address the local customer requirements, Alstom designed a competitive metro traction system called Optonix, specifically for the Chinese market.

A2 We can see that the Chinese government has paid great attention to the environmental issues and made environmental protection an important aspect in improving people’s quality of life. I believe that continuous efforts have to be made and policies be reinforced to promote coordinated development between the economy, the society and the environment. Alstom is committed to bringing environmentally friendly technologies and solutions to the Chinese customers and operators, contributing to the sustainable mobility of the Chinese society.

A3 I am confident that the Chinese economy will grow continuously at a strong pace in the coming years and decade. GDP per capita is only one way to estimate the quality of life, but a greener environment, cleaner air and cleaner water are also part of the quality of life, which cannot be measured in terms of GDP.

A4 I think that China can achieve sustainable development through a strong focus on green economy. Alstom has been focusing on green transport and we are pleased to see that, worldwide, there is strong development of clean urban transit means of transportation, such as tramways. There are a lot of cities in China planning to build tramways and we would like to bring this green solution to our customers in China.

A5 The Fifth Plenary Session indicated that China will further open up its market by deeply integrating into the global economy and driving for win-win and joint development. Alstom is confident about the competitive environment of the Chinese market. When China’s economy grows further, I am sure that the market will become more mature, transparent and fair. At Alstom we will continue to work closely with Chinese partners to contribute to the rail development of the country, while seeking ways for deepened cooperation in the export markets.

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