Survey Identifies Growing Threat in Rebalancing of Chinese Economy across the Asia Pacific region

Hong KongAccording to Grant Thornton’s latest “International Business Report” (IBR) titled Future of Asia Pacific, business leaders across the Asia Pacific (APAC) region believe that the rebalancing of China’s economy, which rose to the second place from the third of last year, poses threat to enterprises in the region. The  findings also show that  economies across the region have formed closer links with China in recent years, thus augmenting the impact of China’s economy on the business environment of the region.

The IBR surveyed 675 business leaders in APAC, and the results reveal that ageing population was still regarded by most of them (35.7%) as a major threat, followed by the rebalancing of China’s economy (33.8%) and the regional conflict caused by competing territorial claims (32.1%).

Enterprises are encouraged to diversifytheir businesses

China's rebalancing of economy refers to the reduction in its reliance on fixed asset investment for growth and the switch to consumption and service sector as key drivers for future growth. Indeed, adter a decades-long "growth miracle", China's economy has lately become asource of mounting concern. According to a report published by the International Monetary Fund (IMF), the Chinese economy will potentially face a bumpy transition and is likely to face risks resulting from rapid credit growth in the medium term.

Robert Quant, Grant Thornton's global leader of collaboration and capability with regional responsibilities for APAC, said, "A number of economoes across the region have formed close links with China in recent years.  In light of China's transition to a more service-led economy, enterprises in the region need to take proactive steps to adapt and minimise the risks of their over reliance on the contry. While China is going to remian a hugely important trading power, firms are advised to explore ways to diversify their businesses - not only deepen the repationship with their trading partners, but also to promote the diversity if products and service offerings, so as to cope with the potential impact of the rebalancing of China's ecenomy.

Envisioningbusiness automation and Trans-Pacific Partnership

When asked about their opinions on what will be the key opportunities for APAC over the next five years, 28.6% of the business leaders in the region said it would be the business automation technology while 25.4% regarded to be Trans-Pacific Partnership (TPP).

Mr. Quant commented: “The ageing population continues to pose both challenges and opportunities to the region. With the evolution of business automation technology, the ordinary way the businesses operate will be changed fundamentally. Only those who recognise the transformative power of technology and automate business tasks and processesare likely to stand a better chance of success in the  years ahead. The TPP is generally quite positively received, particularly among the developed economies across the region. However, the business leaders should also take into consideration the political challenges  resulting from the rise of populist politics that might seekto undermine the multilateral trade agreements infavour of protectionist policies.”

Business optimism increasessignificantly across the ASEAN countries

On the other hand, the IBR shows that the overall business optimism level in APAC increased by seven percentage points to net 28%  in the second quarter of 2016. Optimism among  the ASEAN countries, in particular, increased to a significant level of 34% in the second  quarter of 2016.

Mr. Quant added: “The increase in optimism across the ASEAN countries was remarkable and it was attributable to the opportunities presented by the launch of the ASEAN Economic Community last year, as well as the positive government initiatives. However, there are challenges posed by the growing trend of ageing population and China’s potential, further economic slowdown – both can have asignificant impact on the countries in the region (including the ASEAN countries).”

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Asia Pacific business leaders’ opinionsabout the biggest threats to the Asia Pacific Region over the next five years