26th Annual Global CEO Survey China Report

CEOs brace for a dual-imperative world amid China’s reopening

For over two decades, the PwC Annual Global CEO Survey has offered a rare glimpse into the minds of CEOs from all around the world. This year, to celebrate its 26th anniversary, the survey was extended to 105 countries and territories, with responses from 4,410 CEOs.

The China report is especially noteworthy, as the results came out in tandem with the latest economic reopening of the country as it seeks to resume growth amid the COVID-19 pandemic, and shed light on what new challenges and opportunities mean for business leaders, as they explore what it takes to operate in our dual-imperative world. They will likely find themselves in a new race to ensure business viability and profitability today, while rebalancing priorities to drive sustainable growth for tomorrow.

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48%

of Mainland Chinese CEOs are highly optimistic about their revenue growth in the coming year
33%

of Mainland Chinese CEOs consider geopolitical conflict the biggest threat in the short-term
44%

of Chinese organisations completed innovation of new, climate-friendly products/ processes
67%

of Chinese CEOs believe their business will no longer be economically viable after a decade

What do Chinese CEOs anticipate for the economy in a volatile market?

Concerns for global economic growth in the next 12 months hit an all-time high as CEO confidence declined. Although optimism among Mainland Chinese CEOs is higher than their global peers, their sentiments about the global economy declined to a six-year low. Like their global counterparts, Mainland Chinese and Hong Kong CEOs are less sanguine about territory economy growth than last year.

China’s reopening to the world, after recent adjustments to its pandemic-prevention measures, is being closely watched by the business community. The market in general is anticipating fast-paced recovery in and after the second quarter of 2023 as a slew of stimulus measures shore up market confidence and growth momentum.

How are CEOs turning challenges into opportunities?

Globally, inflation, macroeconomic volatility and geopolitical conflict are the top CEO challenges in both the next 12 months and the next five years. In Mainland China, geopolitical conflict and inflation also top the list in the short term, while macroeconomic volatility ranked fifth, following health risks and climate change. In the mid-term, the top threat is climate change for Mainland Chinese CEOs and geopolitical conflict for Hong Kong CEOs.

In response to geopolitical conflict, global CEOs give preference to increasing investment in cybersecurity or data privacy in the next 12 months, while respondents in Mainland China and Hong Kong are considering adjusting their presence in current markets and/or expanding into new markets.

Are Chinese CEOs ready to manage the impact of climate change?

In 2022, Mainland China experienced record extreme weather. The country dealt with its longest heatwave since 2013 as well as a severe drought along the Yangtze River, which caused a loss of RMB2.73bn. In terms of exposure, 89.6% of China’s population will be exposed to climate-related natural and biological hazard between 2040-2059 according to the UN ESCAP’s moderate climate change scenario. Considering the scale and extent of climate-related disasters on the continent, the heightened concern Chinese CEOs have is well-justified.

This year’s survey results revealed that 37% of Mainland Chinese CEOs expect their supply chain to be impacted, to a large or very large extent, by climate risk in the next 12 months, whereas 16% and 15% of global and Hong Kong CEOs expect the same. A larger proportion of Chinese CEOs also anticipate climate risk to impact their cost profile and physical assets.

How are CEOs ensuring economic viability in the longer term?

The business environment in China, and globally, is increasingly volatile with rising global interest rates and conflicts in numerous industries, including technology. Businesses need to ensure a flexible business model that will enable them to adjust to any disruptions in the market. Based on their respective business models, a larger proportion of Chinese CEOs believe their business will no longer be economically viable after a decade than global CEOs.

Both Mainland Chinese and global CEOs alike believe that changing customer demand/preferences will impact profitability in their respective industry over the next ten years to a large extent. However, more Hong Kong CEOs anticipate these changes to significantly impact profitability than their Mainland Chinese or global counterparts. Technology disruptors are considered to have a major impact on profitability in the CEO’s respective industry over the next 10 years, especially among Hong Kong CEOs.

During this time of volatility, CEOs need to step up to the plate and steer the ship to long-term success. Developing an effective strategy to direct the trajectory of the company is vital.

Implications for business leaders

Long-term success hinges on Chinese businesses’ ability to respond to changing customer preferences and technology disruptors, mitigating impacts of climate change, keeping costs down in light of inflation, all while navigating a more complex international geopolitical landscape.
C-suite executives must broaden the scope and scale of the insights they have access to. This means looking at sector-specific issues, geopolitical shifts, inflation and climate change.
Executive leadership needs to mobilise and be empowered to take action and make decisions that will help the business reach its long-term strategic goals and remain resilient.

CEOs should take a disciplined approach that focuses on capabilities. This means looking at business drivers through a capability lens to decide which investments should be prioritised and which costs should not be cut or limited.
Chinese CEOs should use the current business environment as an opportunity to reinvent their organisational culture. They should build up their talent model by focusing on capability building, recruitment, and retention initiatives.
To effectively enable a successful transformation and stay relevant in the long-term, CEOs should look to form alliances that involve financial, technical, talent and technology capabilities.

‘Chinese businesses will find themselves in a more volatile environment in 2023 as they face growing inflation caused by demand recovery, geopolitical risks, health risks and climate change. Although China’s reopening has injected optimism into the global economy, CEOs in Mainland China and Hong Kong will still need to master the balancing act of running today's race and navigating long-term economic viability with investments that strengthen their capabilities.’

Thomas Leung, Managing Partner - Markets, PwC China