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HSBC CIIE Special: Succeeding in China 2021

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Executive Summary: Nearly 80% of international firms see more opportunities arising from China’s net-zero agenda

On the occasion of the 4th Edition of China International Import Expo, HSBC released its report Succeeding in China 2021 specially curated for the event.

According to the survey of more than 2,000 companies across 10 major economies,

  • Nearly 8 in 10 (76%) of foreign companies feel that China’s desire to transition to a net-zero economy makes expanding there more attractive. More than half are planning to offer greener and more sustainable products for the China market.
  • Nearly 9 in 10 (87%) of international companies expect an increase in their sales or exports to China in the next 12 months. 6 in 10 (59%) are either currently expanding their supply chains in China, or planning to do so in the next 12 months.

The only major economy to expand in 2020 and forecast to grow significantly faster than G7 economies this year, China continues to appeal to international companies and investors. Foreign companies with current or planned investments in China are highly confident about their prospects in this market. Moreover, China’s march towards peak emissions and carbon neutrality is having a real and positive impact. Foreign companies are excited about the opportunities from the country’s net-zero agenda.

Jim Ma | Head of Commercial Banking, HSBC China

Opportunities from China’s net-zero agenda

While there is a lot of buzz about net-zero transition globally, international firms are particularly excited about China’s decarbonisation efforts. For 86% of companies surveyed, China’s drive to sustainability will provide important opportunities for market growth and innovation. Renewable energy (39%), electric vehicles (38%), and energy efficient products (35%) are seen as having the greatest growth potential within China’s low-carbon transition as reflected in the companies’ planned investments.

In the meantime, international companies are taking concrete steps in active support of China’s net-zero agenda. More than half of respondents (52%) plan to offer greener and more sustainable products for the China market. 42% report plan to make their China operations more sustainable. And a further 41% are planning to invest to make their manufacturing facilities or office buildings in the country more energy-efficient or emit less carbon.

Double down on China

Besides green opportunities, China’s overall growth prospect is also drawing international corporate leaders to continue to bet on the country. More than half (52%) of the international companies are planning to ‘significantly increase’ M&A activity and takeovers this year or next. More than 6 in 10 (61%) of international firms state that they intend on investing more than 10% of their operating profit in China in the coming 12 months.

European and Asian respondents are especially bullish about China. Businesses in Europe, one of China’s major trading partners, remain confident in the Chinese market. Approximately 3 in 10 of British, French, and German companies participating in our survey say they are planning to ‘significantly increase’ their exports to China next year. Besides, the pandemic appears to have encouraged Asian engagement with China. Malaysian and Singaporean company executives are most likely to report that following the pandemic they have ‘shifted more production to, or increased investment in China’, with 48% of Malaysian and 44% of Singaporean executives acknowledging this.

Sharpened focus on China’s rapid digitalisation

The fast-changing digital economy – already a growth engine of the Chinese economy – has been further boosted by the pandemic. 9 in 10 (92%) of foreign companies state that China’s rapid digitalisation has improved the growth prospects of their business there. They are now making investments in their digital capabilities to match. 42% of international companies say they have enhanced or are enhancing their digital channels and platforms. 41% say that they have increased their investment in information technology in order to take advantage of China’s flourishing digital economy.

The emphasis placed by international businesses on Chinese technological innovation is apparent. Over 7 in 10 (73%) of the international executives who participated in our survey feel that their target market in China is more technologically advanced than their own domestic markets. These include high-tech markets such as Germany, the UK, and the USA - 68%, 64%, and 61% of their respondents respectively state they feel China to be more advanced.

Artificial intelligence (AI) and the Internet of Things (IoT) are deemed by foreign companies with Chinese investments to be the technological developments that have most significantly benefited their business growth – with nearly 4 in 10 (39%) of respondents selecting one of these developments.