Asia Business Outlook Survey 2014 reports China remains top investment destination in Asia
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China is becoming a standalone business unit in Asia Pacific, as global companies re-organise their operations in the region, according to the Asia Business Outlook Survey 2014 (ABOS) from The Economist Corporate Network. The emerging “Greater China” region includes Hong Kong and Taiwan.
ABOS 2014 reveals that 22% of companies already treat China as an independent unit, suggesting the rapid decline of APAC as a business designation. The main reason cited for the shift is that China represents such a large portion of companies’ business, demanding a team devoted solely to it.
Ross O’Brien, Hong Kong Director, The Economist Corporate Network, said:
“Many of our clients have reported that their China business has grown in size and complexity to the point where management and resources In Asia are diverted away from other markets in region. In order for global firms to successfully grow their business in China and in the rest of Asia, China must stand on its own as a market.”
The survey also reveals that China remains the number one investment destination in Asia, with 70% of companies planning to increase their investment there in 2014. This is somewhat surprising: although it certainly deserves attention—China continues to grow fast, and it is likely to become the world’s largest economy within the next half-decade—rising production costs have placed pressure on the productivity gains multinationals have enjoyed, and rising domestic competition is making it a tougher place to succeed.
Moreover, despite continued popularity among investors, the survey also ranks China highest in Asia for increased regulatory costs. The government has recently introduced new regulations, particularly in the pharmaceutical and healthcare industries, while clamping down on hot issues such as environmental pollution and food standards. Recent calls for consumer protection have also ushered in tighter rules around product safety, as well as efforts to rein in prices and improve affordability.
Other highlights from ABOS 2014 include:
- Despite improving sentiment across the region, many executives feel their companies have set expectations for Asia too high, and are underinvesting in the region
- Executives at global multinational companies say that Asia Pacific is delivering better profit margins than the global average at their companies
- China remains the top investment destination, but Indonesia has overtaken India in second place
- Executives feel the investment climate is improving across Asia, except for India, Australia and Thailand
- Companies appear to make investment choices based on market size and potential, more than on investment climate
- Companies expect sales to grow faster than their workforces in 2014, but the requisite productivity gains to make this happen are proving elusive
- The cost of regulation is rising for companies right across Asia
- Global companies are committing ever more of their leadership teams to Asia
- Staff turnover is edging back up – the battle for talent is hotting up again
About Asia Business Outlook Survey (ABOS)
The Economist Corporate Network—the Economist Group’s advisory service for senior executives at global companies—surveyed 331 clients in December to hear how their business are performing in Asia, and their expectations for the year ahead. The companies came from a wide range of sectors, including professional services, financial services, manufacturing, technology, consumer goods, energy, and the chemical sector. This year’s annual Asia Business Outlook Survey—the eighth in a series—focuses on issues such as the sustainability of Asia’s growth, strategic investment priorities, changes in profitability and productivity in Asia, and the biggest challenges to business in each Asian market. The responses allow the Economist Corporate Network to benchmark the views of senior decision makers across a cross-section of industries, and gauge business sentiment in the world’s fastest-growing region.
This report is sponsored by the following companies: Hays, HP, Jones Lang LaSalle, Carlson Wagonlit Travel, Protiviti, Ruder Finn, The Hong Kong Polytechnic University and Accenture.
About The Economist Corporate Network
The Economist Corporate Network is The Economist Group’s advisory service for senior executives seeking insight into economic and business trends across markets and regions. Independent and thought-provoking, Economist Corporate Network provides clients with the information, insight and interaction they need to succeed. It is led by experts who share a profound knowledge and understanding of both regional and global business issues, with business groups based in Asia-Pacific, Central and Eastern Europe, the Middle East and Africa. Through our tailored blend of high-calibre research, interactive meetings and briefings, Economist Corporate Network delivers country-by-country, regional, global and industry-focused analysis on both current and forecast conditions.
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