China’s manufacturers see growth and R&D as key prio... | KPMG | CN

China’s manufacturers see growth and R&D as key priorities, finds KPMG survey

China’s manufacturers see growth and R&D as key prio...

1000

Media contact

Director, Media Relations

KPMG in China

Contact

Related content

Growth opportunities and increased spend on research and development (R&D) are key priorities for China’s manufacturing executives, according to an annual KPMG global survey.

The report, titled Competing for growth: How to be a growth leader in industrial manufacturing, surveyed 360 senior executives, including 36 from China, across six industries – aerospace and defence, automotive, conglomerates, medical devices, engineering and industrial products, and metals.

As much as 95 percent of China’s executives indicated growth as a high or extremely high priority in the next two years, compared to just two-thirds in the last 24 months. Over 60 percent of global and China respondents prefer organic growth to achieve their expansion objectives, the survey finds. The survey also notes that a majority of China respondents plan to spend at least 6 percent revenue for R&D to drive business growth.

Alex Shum, Partner, Co-Sector Head of Industrial Manufacturing, KPMG China, says: “China’s government has indicated a renewed focus towards encouraging Overseas Direct Investment (ODI) by Chinese companies and China’s manufacturers are therefore looking for opportunities to use their investments to improve access to new overseas markets.”

According to the survey, up to 94 percent of China’s executives plan to enter new geographic markets in the next 24 months; 89 percent said they intend to enter new sectors.

“Manufacturers have gone from a ‘make in China’ strategy to instead gear up for a ‘sell to China’ strategy’,” notes David Frey, Partner, Markets Strategy, KPMG China. “An existing footprint in or around China is helpful but the reality is that selling to China is not the same as producing there; it takes different skills, capabilities, operating models and sales strategies.”

“While many Western manufacturers are talking about a ‘sell to China’ strategy, it is actually respondents from the emerging markets (India and China in particular) that are most likely to be investing in order to gain access to new markets,” he adds. Forty-four percent of respondents from China and 47 percent of those from India said that gaining access to new markets was the primary reason behind their foreign investments, compared to a global average of 34 percent.

Meanwhile, seven-in-ten of China’s executives surveyed said they feel confident/very confident about the growth prospects of their company, industry or country over the next 12-24 months, compared to around 60 percent globally.

Shum adds: “Companies in traditional sectors such as steel, shipbuilding and industrial products see slowing demand and overcapacity. On the other hand, companies focusing on consumers and services, as well as those driven by innovation and technology – such as medical device manufacturers and other high-end manufacturers – have seen impressive growth and are poised to continue this momentum.”

In order to secure future competitive advantage, manufacturers recognize an urgent need to increase their investments in innovation and R&D. The survey highlighted that over 62 percent of China’s executives plan to spend over 6 percent of revenue on R&D over the next two years (31 percent of China’s respondents plan to spend at least 10 percent), while less than half (49 percent) of global respondents plan to do the same. This points to significant growth, as just one-third of global and China manufacturers spent 6 percent of revenue on R&D in the last two years.

Daniel Chan, Partner, Co-Sector Head of Industrial Manufacturing, KPMG China, concludes: “China remains a significant market that can’t be ignored by manufacturers looking for growth. Foreign investors able to bring innovation and investment into new technologies should find strong growth opportunities in China. China’s own manufacturers are keen to move up the value chain and expand their global footprint, bringing not only competition but also opportunities for collaboration.”

– Ends –

About KPMG’s 2016 Global Manufacturing Outlook

KPMG’s 2016 Global Manufacturing Outlook is based on a survey of 360 senior executives conducted in early 2016 by Forbes Insights. Respondents, who represented six industry sectors (Aerospace & Defense, Automotive, Conglomerates, Medical Devices, Engineering and Industrial Products, and Metals), were fairly evenly distributed between the Americas, Europe and Asia.  

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.

Today, KPMG China has around 10,000 professionals working in 17 offices: Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

Connect with us