Live Report: Panel Session - "What Makes China Grow in the Future?"
With moderator Robin Hu, Chief Executive Officer South China Morning Post Publishers Limited setting the scene by introducing the panel. "Our panel members have such illustrious careers that their CV’s are each more than three pages long, so I will give you a shortened version," Hu says, raising an appreciative laugh from the audience. Hu then invites panel members Albert Ng, "Big Four" firm EY Chairman, China and Managing Partner, Greater China, Mark Tucker, Group Chief Executive and President AIA Group Limited, Helen Wong, Chief Executive, Greater China The Hongkong and Shanghai Banking Corporation Limited and Professor Lawrence J. Lau, Ralph and Claire Landau Professor of Economics, The Chinese University of Hong Kong to begin their discussion by explaining how the growth of traditional industries in China slowing down is paving the way for concerns on the future of economic development in the country.
Using her five-minute speaking allocation, Wong says the slowdown of mainland growth is of concern, but the growth is still impressive. "This is the new normal, and look at domestic growth consumption grew by more than 10 per cent in July," notes Wong, who adds the China One belt, One Road strategy should also boost trade and consumption. "The Silk Road funds, new banking and financing for the Belt and Road, will also create new elements for growth, including Hong Kong," says Wong.
Starting his five minute observations, Tucker says demographics and manpower are important contributors to China’s development and transition over the last three decades and have moved the country into a position to where it can now focus on higher-value manufacturing and investments. "Education levels have been increasing, which will help support the new level," says Tucker. He adds that as the population of China ages, new developments will need to cater to their needs, also driving a new focus on what the country needs. "Debate on all these issues including finance and capital markets and debt, are all healthy topics for future growth," says Tucker.
Moving to the podium, Professor Lau says happy 50th birthday to CUHK and highlights how the CUHK was the first business school in Hong Kong. "Since 1979 China’s annual rates of growth have been impressive, and an average rate of 10 per cent for nearly 30 years is unmatched, however, a slowdown is inevitable," observes Lau. "For one thing, the growth of cheap labour, a driver of development was always going to slow down," adds Lau. "There is nothing wrong with a slowdown," he continues and adds how families having more time to spend with each other and more income to spend on items they want are positive moves and cannot be measured by GDP.
Professor Lau continues by saying while Chinese domestic consumption is growing, it is not enough to make up for the slip in GDP. As an alternative, he suggests more investment in infrastructure, healthcare and education and environmental improvements. "Clean air is a benefit for everyone, as is a better standard of living," says Lau, who speculates China’s GDP will continue to hover around six to seven per cent.
Albert Ng, a graduate from the CUHK says it is a pleasure to be talking in front of his former professors. He says he can see no reason why there should be any major slowdown in China’s ODI. "Look at how many now feature on the Fortune 500 list, a few years ago there were just a few, now there are more than 100," notes Ng, who turns his attention to where mainland companies are investing. "They are investing in developed markets as well as developing markets where they mainly invested in natural resources," says Ng. Explaining the significance of the trend, Ng points out how the investments are aligned with needs and developments within China. "People can talk about where China needs to improve, which can be justified to some extent in terms of management and software, but when it comes to hardware, China can compete with the best anywhere in the world," says Ng. "Some are suspicious of Chinese companies, so maybe we should improve our public relations activities," adds Ng.
On the theme of opportunities for Hong Kong, Ng suggests as more medium sized mainland companies look for opportunities to expand overseas, they need people with the knowledge and management skills that Hong Kong already have. "Finance structuring and investing are other key strengths Hong Kong can offer," says Ng.
The panel expand their discussion to talk about monetary policies and supply-side reforms and the way the much-needed transformation could stem from the rapidly growing internet and hi-tech economies, changing demography, de-regulation, new consumer culture and the flourishing Chinese entrepreneurial spirit. Wong opinions if a balance between high saving rates and more spending could be encouraged, it could benefit the mainland’s capital markets. She also suggests if some of China’s failing State Owned Enterprises were allowed to go under, it would cause short-term pain, but allow employees to move into higher value employment sectors and lift confidence in the management of banking finance borrowing.
The panel is now asked if they feel debates over the issue of South China territory ownership could cause problems with China’s overseas investments, for example, in the US. Tucker says most investment is being made by private companies so there is no reason to feel there should be a problem. Professor Lau adds as the first and second largest economies in the world, the US and China have a wide range of reasons to cooperate with each other. "I believe it is the right time for the two countries to work out a bi-lateral trade agreement," suggests the professor.
Ng raises another laugh by saying it could be auditors who have created doubts about Chinese bank debts and risk exposure. Hu says if any members of the audience think accountants are colourless and humourless, those thoughts have been dispelled by Ng’s comment. Ng now suggests the potential for using robotics and solutions linked to the Internet of Things (IoT) could help in both the finance industry and other industry areas in the context of innovation. Professor Lau adds that Ng’s theory seems to be supported by the amount of patent registration from technology companies. Offering further support, Tucker says the spread and diversity of Chinese companies is in line with the growth and development strategies within China. "We do now call the Pearl River Delta the Silicon Delta," notes Wong. Hu adds, this just goes to show: "Things are moving so fast in China, there is no understanding China, only re-understanding China."
A question from the audience about the downside of technology and innovation. Professor Lau says if there is a dark side of technology and innovation, it is the impact on labour markets. "You have to ensure to upgrade the labour market skills levels so they can do other things," says Lau. He continues by explaining about 30 per cent of China’s labour force work in agriculture, but only produce about 10 per cent of needs, which means there is labour capital to be tapped into. Expanding the theme, Ng says it is necessary for companies to transform and change to meet customer and society needs. "Take Kodak and Xerox as examples of what happens when companies don’t change," says Ng. Wong continues by saying innovation brings better lives to people. "Only through education can talent be developed to drive innovation," says Wong.