More Hong Kong, mainland executives plan additional investment in China

A latest study by PwC says more executives from the mainland and Hong Kong plan to increase investment in the former, while stressing they are feeling growing pressure to improve their bottom lines amid the economic slowdown.

The annual survey found 59 per cent of mainland and Hong Kong executives are planning to increase their mainland holdings in the coming year, compared with 54 per cent at the same stage last year.

Encouragingly, 73 per cent of executives said they were either “very” or “somewhat” confident of revenue growth for their business over the coming 12 months, compared with 69 per cent a year ago.

The report said the mainland continues to be the world’s largest growth market, and that it is competing well with the United States as a top destination for cross-border investment from the Asia Pacific region.

The opinions were gathered between May and July from 1,100 executives across the region’s 21 economies, including 222 from the mainland and Hong Kong.

“China’s scale and skills mean concerns about its slower economic growth are not enough to put business leaders off investment and expansion,” said Raymund Chao, PwC’s Greater China chairman.

Despite the slight recovery in investment and revenue confidence, however, respondents also warned of growing pressure on bottom lines.

Only 15 per cent said they were “more confident” now than they were a year ago about increasing profit from domestic operations, compared with 21 per cent in 2015, and 41 per cent the year before.

Business leaders showed particular concern about their ability to interpret and keep up with new regulations being introduced, and at anticipating the costs involved in those.

Just 12 per cent of respondents were “more confident” today at forecasting compliance or tax liabilities, compared with 16 per cent in 2015.

In May, China launched one of its most ambitious tax regime overhauls yet by shifting from business tax to value-added tax, and more reforms are expected in the coming year, putting extra pressure on businesses to keep pace.

The measures, according to the State Council, will reduce the tax burden on companies, and industries including finance and construction are among the latest to adopt the reforms.

Besides those growing uncertainties, the PwC survey suggested doubts also remain about the mainland’s near-term economic growth, with 27 per cent of respondents expecting the economy to grow less than 5 per cent annually over the next three years.

Mainland GDP expanded 6.9 per cent in 2015, the slowest growth in a quarter of a century. The economy expanded 6.7 per cent in the first three quarters, going some way to helping the central government to achieve a minimum 6.5 per cent economic growth rate this year.