Further, among Hong Kong CEOs, Mainland China is considered the most important market for growth (78%), while China ranks second among global CEOs (27%).
CEOs based in Mainland China CEOs are most concerned about the global health situation as the pandemic lingers, with 42% saying they are extremely or very concerned about global health risks impacting their company’s growth in the next 12 months. The second biggest threat on their radar is macroeconomic volatility (41%), including fluctuations in financial markets, global trade disruptions and surging inflation, followed by geopolitical uncertainties (32%) and climate change (31%).
Cyber risks are less of a concern for Mainland China CEOs (22%) relative to their overseas counterparts, with many economies reporting over 50% of ‘extremely concerned’ or ‘very concerned’ responses.
These results have been pulled from PwC's 25th Annual Global CEO Survey China Report, which also found that overall there is optimism among global corporate leadership about economic growth (with 77% expecting an improvement), a sentiment that is more enthusiastic than that of CEOs in China and Hong Kong, whereby 62% and 68% of CEOs respectively are expecting the global economy to improve in the year ahead.
However, the survey was conducted in October and November of 2021, thus the above view hasn’t reflected rapid spread of Omicron in China, as well as the geopolitical tensions between Russia and Ukraine. Overall, PwC surveyed 4,446 CEOs in 89 countries and territories for this round, of which 180 CEOs were from China (143 from Mainland China and 37 from Hong Kong SAR).
Thomas Leung, Managing Partner - Markets, PwC China said: "In the past year, China’s economy has maintained a steady recovery trend even in the complex and severe domestic and foreign context, facing many risks and challenges. Looking into 2022, businesses can expect to face additional challenges posed by macroeconomic volatility, geopolitical tensions, cyber risks, and the increasingly urgent need to transition to a net-zero economy."
Hong Kong CEOs consider Mainland China the most important growth market
Mainland China's CEOs consider the US (29%), Australia (24%), Germany, and Japan (23%) as their most important overseas markets for revenue growth over the next 12 months. However, on the business level, the survey shows a diminished reliance on external economies for growth compared to a year ago.
Among Hong Kong CEOs, Mainland China is considered the most important market for growth (78%), while China ranks second among global CEOs (27%).
In terms of priority markets for outbound investment, Mainland Chinese CEOs are targeting Asia Pacific (66%), Belt and Road countries/regions (50%), and the EU (48%) in the next 12 months, while Hong Kong CEOs plan to invest in Asia Pacific (69%) and ASEAN (46%).
ESG and sustainability: Business metrics over social outcomes
In line with the ambitious national ‘double carbon’ commitments, 85% of Mainland Chinese CEOs have either made (51%) or are working towards making (34%) net-zero commitments. In contrast, only 22% of Hong Kong CEOs have already made such commitments with 38% working towards one. Globally, only 22% have made net-zero commitments, while 29% are working towards one.
As defined by the UN, net zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests for instance.
Among Mainland Chinese CEOs who have made net zero commitments, the following were some of the practices being reported:
- 93% reported the adoption of science-based targets.
- Over half (58%) of China-based CEOs cited switching to renewable energy and improving energy efficiency as a top priority.
- This was followed by reducing the company’s waste and water consumption (56%) and designing more sustainable products and services (52%).
As for ESG strategy in China, PwC reported it as "still primarily driven by business metrics rather than social or environmental outcomes".
This comes from the observation that despite rising interest in ESG adoption, the majority of CEOs in China CEOs indicated that their ESG strategy in the nation is closely linked to business metrics such as customer satisfaction, automation and digitisation goals, employee engagement metrics, etc. rather than social or environmental outcomes (like greenhouse gas emission targets or gender representation rates).
Seven in 10 (71%) Chinese CEOs have goals related to customer satisfaction in their long-term corporate strategy, followed by automation and digitisation (58%), and employee engagement metrics (50%). These non-financial outcomes are intertwined with day-to-day business performance. For 46% of Chinese CEOs, targets to reduce GHG emissions are also included in their long-term corporate strategy so as to align with the country’s commitment to achieve carbon neutrality by 2060.
James Chang, Managing Partner of Regional Economic Clusters, PwC China said: "As China reduces its reliance on foreign markets, and looks towards regional economic clusters for growth, Chinese business leaders will be able to leverage abundant opportunities at home. To ensure sustained outcomes, Chinese CEOs will need to look beyond short-term financial metrics, and incorporate ESG into their long-term strategies. In the new normal, CEOs can no longer afford to keep sustainability on the back-burner."
Lead photo / 123RF