2013 China Development Forum survey report. Choosing China: Insights from multinationals on the investment environment

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Chester Waters
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1 2013 China Development Forum survey report Choosing China: Insights from multinationals on the investment environment

2 Target growth markets Which three of these key markets would you invest in? Source: The PwC Global CEO Panel (227 respondents) Note: The results exceed 100% because each respondent chose more than one destination for investment. 19% 34% Russia 25% 56% 26% 37% Turkey United States China India 11% 12% Mexico 52% Indonesia South Africa Brazil

3 Investment in China by region Investment status of CEO respondents (by region) in China Source: The PwC Global CEO Panel (227 respondents) Note: The figures in the graphs in this report have been rounded to the nearest percentage so overall percentages may total 101% or 99% in some cases. Africa (21) Asia Pacific (23) Central and Eastern Europe (10) Latin America (55) Middle East (6) North America (28) Western Europe (84) 14% 86% 39% 61% 40% 60% 40% 60% 100% 57% 43% 43% 57% Has investments in China No current investments in China 52% 65% 70% 45% 17% 82% 55% Proportion choosing China as one of the three markets offering the best prospects for growth for their business and a top target for investment. Africa (21) Asia Pacific (23) Central and Eastern Europe (10) Latin America (55) Middle East (6) North America (28) Western Europe (84) Source: The PwC Global CEO Panel (227 respondents)

4 Strategies for growth Considering the options below, what are your three main growth models in China currently? What are your three main growth models in China in the next five years? Source: The PwC Global CEO Panel (90 respondents who have investments in China) Greenfield investments Facilities expansions Organic growth models 28% 44% 38% 51% Inorganic growth models Mergers and acquisitions Joint ventures 11% 43% 38% 36% Licensing to distributors/ franchising 38% 22% Strategic alliances 26% 37% New product research and development 30% 34% Next 5 years Currently

5 Investment plans CEOs planning on changing the level of investment into China in the next five years. Source: The PwC Global CEO Panel (90 respondents who have investments in China) 29% 23% 16% 12% 7% 12% 1% Decrease 26 50% No change 0% Increase 1% 25% Increase 26% 50% Increase 51% 75% Increase more than 75% Not sure

6 Allocation of investment in China If you were given 10 credits to invest in your three markets targeted for investment, how many of these credits would you invest in China? Source: The PwC Global CEO Panel (128 respondents who chose China as one of their three top markets to invest in) 26% 27% 23% 12% 8% 2% 2% 1% Number of credits

7 Allocation of investment in global markets How CEOs would allocate their investment across markets out of a total of 10 credits. Economies Number of credits Average Source: The PwC Global CEO Panel (varying base sizes contingent on those who allocated at least one credit to a particular market) United States (78) 3% 13% 21% 24% 21% 9% 4% 1% 1% 4% 4.31 China (128) 2% 12% 26% 27% 23% 8% 2% 0% 0% 1% 3.95 Mexico (58) 7% 23% 23% 26% 14% 4% 2% 0% 0% 2% 3.47 Brazil (119) 7% 24% 29% 21% 13% 3% 2% 0% 0% 1% 3.34 South Africa (26) 8% 19% 46% 15% 8% 0% 4% 0% 0% 0% 3.12 Indonesia (28) 0% 39% 36% 7% 18% 0% 0% 0% 0% 0% 3.04 Turkey (56) 0% 43% 27% 20% 9% 2% 0% 0% 0% 0% 3.00 Russia (43) 5% 26% 42% 23% 5% 0% 0% 0% 0% 0% 2.98 India (84) 4% 32% 42% 19% 2% 1% 0% 0% 0% 0% % 50%

8 Target markets by sector Top four growth markets chosen by CEOs in each sector. Source: The PwC Global CEO Panel (225 respondents from consumer, industrial products and services, financial services, and technology, information, communication and entertainment companies) 58% 48% 37% 37% 48% 55% 33% 33% 64% 80% 40% 28% China Brazil India United States Consumer, industrial products and services China Brazil India Turkey Financial services China Brazil India United States Technology, information, communication and entertainment Base: All respondents (158) Base: All respondents (42) Base: All respondents (25)

9 Attractions for investment and growth Which of the following factors most influenced your selection in each country? Source: The PwC Global CEO Panel (227 respondents) China (128) Brazil (119) India (84) United States (78) Mexico (58) Turkey (56) Russia (43) Indonesia (28) South Africa (26) Expanding domestic market and demand 34% 81% 46% 23% 29% 23% 60% 39% 38% Level playing field with local competitors 30% 24% 23% 28% 26% 30% 19% 32% 15% Government incentives 27% 22% 18% 27% 31% 25% 16% 21% 31% Skilled talent pool 27% 18% 35% 27% 26% 21% 23% 18% 38% Lower labour costs 26% 18% 48% 24% 21% 23% 21% 25% 19% Favourable tax regime 22% 5% 23% 28% 22% 20% 12% 21% 23% High quality and cost competitive suppliers 21% 18% 11% 31% 22% 29% 16% 11% 31% Proximity to supply chain 20% 20% 14% 22% 19% 25% 26% 14% 15% Advanced infrastructure 20% 11% 12% 23% 22% 25% 14% 18% 12% Low level of bureaucracy and regulations 17% 6% 11% 22% 31% 23% 9% 14% 23% 0% 100%

10 Impact of government priorities Top issues for CEOs from the list of key areas of commitment identified during the 18th National Congress of the Communist Party of China. Source: The PwC Global CEO Panel (227 respondents) Economic development driven by domestic demand, particularly consumer demand 48% Deepen financial reform and promote the steady liberalisation of foreign exchange controls and interest rate policy 43% Doubling per capita income by 2020 (both urban and rural residents) 41% Addressing systemic barriers that stand in the way of development 32% Sustainable development of advanced manufacturing, modern service and key emerging industries; transformation of traditional industries 26% Lower carbon intensity and major pollutants emissions level 18% Increase the contributions of technological advancements to GDP growth in creating an innovation-based economy 18%

11 Impact of government priorities Areas CEOs would like the Chinese Government to focus on. Source: The PwC Global CEO Panel (227 respondents) Improving government transparency and anti-corruption Reducing economic intervention and increasing private competition Speeding up capital markets reform 73% 53% 30% Boosting domestic consumption and demand Creating a favourable environment for developing innovation and entrepreneurial talent Increasing incentives to do business in China 28% 26% 22%

12 Developments in regulation In the following key areas, would you say that the regulatory environment in China has improved, deteriorated or stayed the same over the past three years? Source: The PwC Global CEO Panel (227 respondents) Deteriorated Stayed the same Improved Not sure Capital markets regulation 4% 45% 28% 23% Regulations on foreign investment 10% 42% 25% 23% Foreign exchange controls 7% 50% 22% 21% Taxation and fiscal regulations 7% 52% 11% 30% Intellectual property regulation and enforcement 16% 44% 14% 26%

13 Talent factors most influential to investment CEOs indicating that talent factors are influential to their decision to invest in each market. Source: The PwC Global CEO Panel (varying base sizes contingent on those who allocated at least one credit to a particular market) China (128) Brazil (119) 18% 18% 26% 27% India (84) 35% 48% United States (78) 24% 27% Mexico (58) 21% 26% Turkey (56) 23% 21% Russia (43) 21% 23% Indonesia (28) 18% 25% South Africa (26) 19% 38% Lower labour costs Skilled talent pool

14 Siting of regional HQ Is having an Asia Pacific regional headquarters in China part of your global strategy? Source: The PwC Global CEO Panel (90 respondents who have investments in China) 42% 42% 2% 13% We currently have our Asia Pacific regional headquarters in China We have plans to move our Asia Pacific regional headquarters to China We have no plans to move our Asia Pacific regional headquarters to China We have no Asia Pacific regional headquarters

15 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. HK C1

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