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Recharting the Path to Sustained Outcomes
2021 marked a challenging year as the world attempted to recover from the COVID-19 pandemic amidst the rapidly evolving business and geopolitical climate. To navigate these turbulent times and achieve outcomes that matter, CEOs in China are urged to look beyond short-term financial goals and identify factors that are critical to their company’s long-term growth.
The global economy is likely to face new headwinds amid geopolitical tensions and spiking inflation, with the IMF projecting global growth to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. Looking into 2022, businesses will likely find themselves in a more challenging environment complicated by macroeconomic volatility, geopolitical tensions, cyber risks, and the increasingly urgent need to transition to a net-zero economy.
PwC’s 25th Annual Global CEO Survey China report explores the global and company-level growth sentiment among executives in Mainland China and Hong Kong, as well as the steps they are taking towards a more sustainable future.
of executives in Mainland China expect global economic growth to improve in the year ahead
of Mainland Chinese CEOs consider the US the most important external market
of Mainland Chinese CEOs have made a net-zero commitment
of Mainland Chinese CEOs are most concerned about health risks impacting their growth prospects
At the beginning of the outbreak, China’s economy showed resilience and managed to expand by 8.1% in 2021. But weakening indicators in the closing months of 2021 and early 2022, such as slowing consumption and deleveraging in many sectors, suggest that threats to growth remain as the country grapples with various risks. As such, Mainland Chinese CEOs have subdued confidence (62%) about economic growth, down from 2021 (71%) due to weakening economic indicators.
Despite this conservative economic outlook, 48% of Mainland Chinese CEOs have higher confidence levels about their company’s prospects for revenue growth in the short-term than 2021 (31%). While firms have adjusted their operations to the pandemic-induced New Normal, they are also supported by accelerated growth in the digital economy and a favourable legislative shift, among other initiatives.
However, businesses are yet to see the full scale of impact the clustered outbreaks and geopolitical conflict will have, in addition to other risks.
As the pandemic lingers, Mainland Chinese CEOs remain highly concerned with health risks impacting their company growth prospects in the short-term (42%), making it the top threat closely followed by macroeconomic volatility (41%). CEOs were most concerned about these threats disrupting their ability to sell products or services.
ESG has been a top item on CEOs’ agendas in recent years, with an increasing demand for companies to incorporate ESG considerations in their strategies and to issue ESG reports.
China is taking the lead on the climate change front with 51% of Mainland Chinese CEOs making net-zero commitments, more than double the global average (22%). Among supporting sustainability-related actions, 58% of Chinese CEOs have switched to renewable energy and/or improved energy efficiency in the workplace.
The driving factor for these initiatives among Mainland Chinese CEOs is compliance with government targets (45%) rather than mitigating climate change risks as seen among global CEOs (63%).
With constant disruptions in the business environment brought about by the pandemic and increasingly uncertain times, businesses need to have a robust and dynamic strategy to ensure their survival and success. 85% of Mainland Chinese companies had more than one overarching strategic objective while 41% had more than three.
However, despite the rising interest in ESG adoption within organisations, the majority of Chinese CEOs indicated that their ESG strategy is still driven more by business outcomes or metrics than social or environmental outcomes.
‘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. CEOs in Mainland China and Hong Kong will need to rethink their strategic roadmap for sustainable growth, identifying long-term growth opportunities by going beyond short-term financial metrics, to navigate these turbulent times and ensure sustained outcomes.’