Business leaders share views on forum

(China Daily) Updated: 2017-03-18 06:59

During the 13th Five-Year Plan (2016-20), China is emphasizing supply-side reform and long-term prosperity brought about by economic restructuring. With the annual China Development Forum that kicks off in Beijing on Saturday, senior executives of multinational companies from a variety of sectors share their insights into the country's new five-year plan and how their companies expect to adjust or improve their strategies in China.

Q1:

What business opportunities do you see as China pushes the Belt and Road Initiative? Have you participated or do you plan to participate in any projects under the initiative? How do you think infrastructure investment can contribute to global growth?

Q2:

How do you expect the Chinese economy to perform this year? How would you comment on the business environment for foreign companies? Do you plan to increase investment or expand your presence in the Chinese market?

Q3:

China will continue to carry out supply-side reforms this year. What do the reforms mean for business and how will you adjust your business strategy in China accordingly?

Q4:

How do you think China's effort to upgrade its manufacturing capability and boost innovation will spur vitality and competitiveness of the economy? What business opportunities will likely emerge in this process?

Hans-Paul Burkner global chairman of Boston Consulting Group

A1 The Belt and Road Initiative, proposed by President Xi Jinping in 2013, has brought numerous economic benefits to the world economy and has been a win-win solution for countries involved in the plan. The initiative has dramatically increased investments in infrastructure of countries along the route and spurred international trade. China's advanced technologies, facilities and experience in infrastructure offer new opportunities for member countries to upgrade their industries and market mechanisms. The initiative has also become a driving force for China's growing industries, including energy, information technology, finance and tourism. As one of the biggest consulting firms in the world, BCG has set up offices in many countries along the road. It helps to assess the investment risks and opportunities for China' real estate companies and financial firms who are eyeing markets along the road.

A2 China's economy will stay stable this year but we are confident about future growth. History has shown that the opening-up of the market is key to China's economic growth in the past 30 years and we think the country will continue its integration into the global economic system. We should focus more on the quality of economic growth and the reform goals in China's 13th Five-Year Plan (2016-20) rather than pursue short-term, high-speed growth. We predict that supply-side reform will help to improve the quality of economic growth this year in terms of lowering capacity, destocking, deleveraging, reducing costs and overcoming deficiencies. We also predict that foreign companies will benefit from the process, especially highly localized ones who are more adaptable in the market. We support the policymakers of Chinese companies to form professional advice on key issues such as globalization and digitalization. BCG will continue to invest in the development of technologies and professionals in China.

A3 In the first few years of China's supply side reform, we have witnessed a stable macro economy. As a powerful measure to foster economic growth, it has shifted focus from economic increments and speed to quality and structure. The reform requires government to reinforce the values of innovation, management, research and development and services. On the macroeconomic side, the budget def i cit will not expand. On the microeconomic side, enterprises should focus on innovation and human capital, while financial institutions need to control risks and apply financial tools to restructuring industries and allocating resources. The reform will also exert profound influence on the real estate, agriculture, auto and service industries. As a leading consulting firm, BCG aims to improve the ability of companies at different developmental stages. We are excited to cooperate with local enterprises and create more value for the Chinese market.

A4 We believe that manufacturing has been a pillar industry in China through the long term, regardless of the country's stages of economic transformation. The industry is indispensable for employment and economic development. China needs to upgrade its manufacturing industries, as detailed in the Made in China 2025, a plan released by the government in 2015 to transform the country from a manufacturing giant into a global manufacturing power, during the 13th Five-Year Plan (2016-20). BCG has a deep understanding of manufacturing in developed markets such as Germany and the United States.

We believe China should combine its own conditions with international experiences to improve technology, management and infrastructure of the manufacturing industry.

We believe upgrading of the manufacturing industry may improve the efficiency of China's enterprises to 25 percent and help to create new jobs. With the high quality of labor in manufacturing, and with new technologies such as robots and sensors, Chinese enterprises have many opportunities with high-end products.

Derek Aberle president, Qualcomm Inc

A1 Information interconnectivity is at the heart of the Belt and Road Initiative. With the support of Qualcomm's transfer of technology through licensing, China's local mobile communications industry has made outstanding progress in expanding beyond China. In 2015, we established a dedicated team in Shenzhen specifically to support Chinese vendors in this effort.

More broadly, investment in infrastructure is key in driving global economic growth.

With the massive increase in data traffic as consumers and enterprises use their devices to access a broad array of cloud content and services, data centers are becoming an important part of global infrastructure investment of the coming years.

We see an exciting opportunity to use our extensive system-on-chip architecture design and low-power, high-performance computing expertise to provide a solution that offers a compelling balance of performance, power consumption and cost.

Last year, Qualcomm and the Guizhou government established Guizhou Huaxintong Semiconductor Technology, a joint venture to design and sell world-class server chipsets in China.

A2 Qualcomm is pleased to be a part of promoting innovation with its Chinese partners to support economic growth and drive the development of wireless and semiconductor technology in China and around the world.

To this end, we have deepened our level of cooperation with Chinese companies, including our Huaxintong server technology joint venture with Guizhou province.

We are also appreciative that, in recent years, the Chinese government has made significant achievements in intellectual property protection, which have helped to attract companies and bring leading technologies to China, while encouraging innovation among Chinese corporations.

A3 Qualcomm will continue to strive to collaborate with Chinese industry partners on strengthening the supply system in China. To Qualcomm, innovation is the core of supply-side reform.

For example, SMIC and Qualcomm have been developing 28nm processing technology and wafer manufacturing services for manufacturing Qualcomm Snapdragon 410 processors, which were adopted into mainstream smartphones in 2015.

Qualcomm is co-investing with domestic handset manufacturers to bring premium mobile experiences to consumers.

Many Chinese mobile phone brands are enjoying increasing popularity and good reputations abroad - the result of the effective joint innovation and emphasis on reform, from our perspective.

We also are committed to working with our partners to accelerate 5G development and encourage innovation in many areas to support China's growth, including virtual reality, drones, connected cars, healthcare and data centers. 5G will make possible new advanced applications, foster business innovation and spur economic growth.

A4 As President Xi Jinping mentioned in Davos, innovation is the primary force guiding economic development and Qualcomm is pleased to be part of this transformation.

5G will create an era of very rapid innovation, not only among the mobile industry, but adjacent industries that can also benefit from 5G services.

A recent global survey commissioned by Qualcomm shows that 96 percent of business decision makers and technology influencers in China believe 5G will make companies more competitive globally. Ninety-three percent believe 5G will enable new industries to emerge.

Most believe 5G will result in the establishment of products and services that have yet to be invented.

For instance, 5G will provide high bandwidth, low latency, highly reliable and secure wireless solutions to enable industrial automation to maximize overall equipment effectiveness. Like it did in 3G and 4G, Qualcomm is leading the industry on to 5G.

Oleg Mukhamedshin deputy CEO, United Co Rusal

A1 On the one hand, the initiative is a large-scale infrastructure project which represents tremendous potential for aluminum consumption, which is great for our industry. Aluminum is widely used in the transportation and construction sectors, therefore we may expect to see a considerable increase in demand for the metal. At the same time, this could be also a challenge for China as the country fights against air pollution. One must remember that aluminum production is a very energy-intensive process that requires a lot of electricity.

At present, the vast majority of aluminum production in China relies on coal-f i red power, which generates significant amounts of greenhouse gas emissions. On our end, we propose that our Chinese partners develop aluminum smelter projects in Russia based on hydro power and consider opportunities of our aluminum valley project to produce value-added and downstream products to meet a growing demand for the metal in China. Russia's Eastern Siberia shares a border with China and this is where vast reserves of natural resources and efficient hydroelectric power remains.

A2 China's leaders have officially announced their aim to expand the country's economy by around 6.5 percent in 2017. I think China will reach their target. The Asian market, China in particular, has always been an important strategic location for Rusal. The company continues to develop its business in the region, both directly and in partnership with Chinese companies. Since 2015, Rusal has participated in the China Development Forum. Rusal attends all China-Russian intergovernmental cooperation meetings for investment, industry and energy cooperation. Rusal actively collaborates with Chinese metallurgy industries and the professional community through its membership in the China Nonferrous Metals Industry Association, CNIA, and the China Nonferrous Industries Fabrication Association, CNFA. Rusal's purchases of materials from the Chinese market totaled 3.99 million metric tons for the year of 2016.

A3 Supply-side reforms come in critical times. They are the only way to secure China's sustainable growth. Structural reform in China has already proven efficient for the steel and coal sectors: closure of outdated capacity resulted in more efficient use of natural resources, rebounding commodity prices, recovery of profitability and the launch of a number of debt-toequity swap deals. Now the aluminum industry is expected to follow governmental guidelines for industries with overcapacity. Over the past four years, aluminum capacity in China has expanded by approximately 57 percent and, by the end of 2016 exceeded domestic demand by more than 30 percent. As a result, the price of aluminum continually declined from 2011 to 2015, forcing the government to deal with the problem of overcapacity in the industry. Additionally, such expansions resulted in environmental pressure and over-concentration of the aluminum industry within certain areas.

A4 Without any doubt, innovation is one of the key components of success in a highly competitive global economy. However, innovation requires time and significant investment and the aluminum industry is no exception in this aspect. The Chinese aluminum industry has been facing challenging times recently. Over the past four years, Chinese aluminum producers have been operating at near breakeven levels and increased their financial exposure in order to expand capacity.

We believe it is crucial to find a way out of this vicious circle through consolidation of the industry and improvement of production efficiency, which would help decrease financial leverage. This in turn will give more financial flexibility to Chinese companies for investment in R&D.

Gao Feng chairman & chief country officer of Deutsche Bank China

A1 The Belt and Road Initiative offers huge business opportunities to a major international financial institution like us, given the wide geographic coverage of over 60 countries from Asia, Europe and Africa.

The link will promote the efficient allocation of resources and deep integration of markets, which will significantly increase flows in trade, people and capital.

Our capacities in transaction banking and capital markets enable us to provide cross-border banking services of the highest standard and facilitate the growing trend of Chinese enterprises going overseas.

A2 We expect that China's GDP growth will stay stable at a world-leading rate of 6.5 percent in 2017.

Sustained growth with increases in external trade and domestic consumption, as well as the continued push in market opening and deregulation, will provide more room for foreign companies to expand and grow.

We are deeply committed to developing our franchise here, helping our local and multinational corporate and institutional clients to benefit in more effective ways from the huge opportunities offered by China's economic success.

A4 To enhance the country's competitiveness in a global setting, such moves are necessary and we have already seen the results, with entrepreneurs investing in more sophisticated industries which require greater skills and upgraded technology.

For the banking sector, financial technology brings both challenges and opportunities. We currently see competition coming not only from other financial institutions, but also firms which use new technology and innovation to compete with us in the delivery of financial services.

Close monitoring of the sector and proper engagement with enterprises providing related services will enhance traditional banking players' capabilities and help them offer competitive advantages in this fast-evolving market.

Major sessions today

9:40-10:40 am

Saving globalization

Propelling supply-side structural reforms

China-US relations under the Trump administration

11:00 am-noon

Global shifts in manufacturing

The EU and European economy: The next black swan?

Tackling the anxieties of the middle-income group

The Paris agreement: A step forward or backward?

"America First": Outlook and global impacts?

2:10-3:10 pm