BEIJING, CHINA - MediaOutReach - 25 January 2019 - Businessesin China are cautiously optimistic for 2019 despite facing a number of globaland domestic uncertainties and challenges, with tax reform and innovation andtechnology policies expected to provide a boost to the economy and businesses, according to the latest China Economic Survey conducted by CPAAustralia, one ofthe world's largest professional accounting bodies.

From left to right: Mr William Huang, President of CPA Australia South China Committee, 

Mr Kevin Ng, Member of CPA Australia North China Committee, 

Mr Derek Chan President of CPA Australia North China Committee, 

Mr Michael Yu, Deputy President of CPA Australia East & Central China Committee

Over 60 per cent of respondents forecast that Chinawill maintain stable economic growth above 6 per cent in 2019, despite risingglobal economic uncertainties created by trade tensions, Brexit, and rising USinterest rates. This confidence is reflected in profit forecasts for 2019, with56.8 per cent of respondents expecting their employer's profit to increase by morethan two per cent. Further, 71.3 per cent believe that their company will maintainor increase its headcount in 2019.

Top factors influencing this positive sentiment aretax reform, policies guiding the transformation of China to an innovative andintelligence-led economy and the Belt and Road Initiative, according to the financeand accounting professionals responding to this survey.   

Tax reforms seen asan important driver of economic growth in 2019

As part of an ongoing agenda to improve livingstandards, the Government introduced a series of tax reforms in 2018, whilesome policies, such as individual income tax reform, came into effect on 1 Jan2019. The survey findings reveal that the market has reacted positively to thesereforms, with over half of the respondents stating that tax reform will be oneof the key drivers boosting economic growth this year.

Respondents believe the main benefits from tax reform include decreasing businessoperating costs, further encouraging China's economic transformation, increasingdomestic consumption and making the tax system more robust. Individual incometax reform is also expected to help businesses, with almost one third ofrespondents expecting that this reform alone will increase their sales volumein 2019.

Innovation andtechnology keep boosting growth

The survey found that the Government policiesguiding China's economic transformation and supporting innovation andtechnology are expected to not only continue to boost the economy but also supportbusiness growth.

Overhalf of respondents reported that their business's investment in technology inthe past 12 months has already improved their profitability.

Businessesin China are also investing heavily in innovation, with 75.5 percent of respondents expecting their company will or mayintroduce a totally new product, service or process in 2019, which is anincrease of 10 per cent compared with the survey result in 2017. We see adirect link between the Government's policies and the very strong focus on innovationand technology by businesses in China.

Goingglobal strategy and opportunities from Belt and Road Initiative

Though businesses are facing rising global economicuncertainties, the professionals who responded to this survey value the businessopportunities created from China's opening-up and going abroad strategy. On theBelt and Road Initiative, most respondents believe it will create newinvestment opportunities for Chinese businesses outside of China and createmore trade opportunities.

Whenasked the business's plan in response to the Belt & Road Initiative overthe next three years, over half of the respondents reported an expectation thattheir business will take some form of action to take advantage of the initiative,including exploring new business opportunities and increasing businessactivities in the countries along the Belt and Road.

Alongwith a global strategy and the internationalisation of the RMB,almost one quarter ofrespondents say that they expect their business will likely establish or expandtheir presence in other countries in 2019.  

Business strategyin 2019

Given rising global uncertainties, it is nosurprise that most businesses have chosen cost management as their keystrategic focus in 2019. However, under the transformation to anintelligence-led environment in China, a very high number of respondents statedthat their employer's strategic focus for 2019 is to attract, retain anddevelop talent. This reflects their optimism in the medium to long-term and theirbelief that talents are critical assets to enable the business'ssustainability. When asked which skills were most valued by employers,respondents identified teamwork capability, technical skills and communicationskills.

Accordingto the survey findings, many businesses in China will this year be attemptingto strike the right balance between short-term measures, such as costmanagement to address current challenges, and medium to long-term investmentsin staff, technology and innovation, which is essential to their future growthand success.

About the survey

Thesurvey was conducted from 14 December 2018 to 10 January 2019 with 220 of CPAAustralia's Greater China members participating, including finance andaccounting professionals from listed companies, multinational corporations,private enterprise and government.

About CPA Australia

CPA Australia is one of the world's largest accounting bodies with morethan 163,000 membersworking in 125 countries and regions around the world, and with more than25,000 members working in senior leadership positions. It has established astrong membership base of more than 18,000 in the Greater China region.