Execs see myriad growth opportunities

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 is taking place in Beijing on Monday, 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 plan to adjust or improve their strategies in China.

Q1:

As China restructures its economy with an emphasis on supply-side reforms such as cost cutting and pruning of industrial overcapacity, what could be the implications for your operations in China?

Q2:

How will the renminbi's depreciation and slumping commodities prices affect your business operations in China?

Q3:

In terms of annual revenues and profits in the 2016-20 period, what are your expectations for your company's performance in China?

Q4:

What effect do you think the economic restructuring will have on long-term prosperity in China and to your business in the country? How do you intend to overcome your biggest challenges?

Derek Aberle

president, Qualcomm Inc

A1 We see significant opportunities - not just for our China operations but also for our entire company - to continue building shared value as China furthers its economic transition. Qualcomm has actively participated in the leapfrog development of China's communications industry, and made significant contributions to driving technological advances and industrial development with our partners across the Chinese mobile ecosystem. China is making great efforts to implement its Internet Plus and the Made in China 2025 strategy. This is perfectly aligned with our vision of "transforming the edge of the Internet". With mobile the largest technology platform in history, Qualcomm aims to be a key enabler of innovation and entrepreneurship for Chinese individuals and industries.

A2 We make our business decisions on a long-term basis, looking for ways to create value today and into the future. While China's economy - and indeed the global economy - is in the midst of an economic adjustment, long-term prospects for the country are still strong.

China is and will continue to be one of the most dynamic and exciting markets globally for a number of our core focus areas such as mobile communications, the data center and advanced semiconductor design and fabrication. These short-term fluctuations are the result of a few long-term shifts that are favorable for our business operations in China. A large part of our business in China is linked to domestic sales of products and technology licensing, and many parts of the Chinese economy remain strong.

A3 China is an important pillar of global economic growth. Regarding industrial development that impacts our performance, we expect China's suppliers will expand sales of their innovative smartphones all over the world. Other industries where China excels, like drones, robotics, mobile healthcare and smart homes, will also enjoy considerable growth. Additionally, big data and server chipsets are poised to become high-growth areas in the future. All of the above-mentioned industries will be important contributors to our investment and business development in the coming years.

A4 As the Chinese government will invest more effort into developing the nation's innovation-driven and consumer-driven economies, we have good reason to expect a bright future for China's economy, and many opportunities for the global economy as a result. Wireless technology is one of the best catalysts for innovation-driven and consumer-driven economies, and as an enabling technology, it will drive development in various other fields. The majority of mainstream mobile suppliers adopt Qualcomm chipsets for their flagship smartphones, and we are now expanding our breadth of technology and ability into other industries to drive the development of the Internet of Things.

Carlos Brito

CEO, AB InBev

A1 Operational efficiencies are important for our business. We have been investing in China for the future to build our footprint and innovation capabilities. This has a long-term impact on our ability to increase our efficiencies and to grow top-line.

A2 We have some 40 breweries in China and we brew most of our volume domestically.

Hence, our operations in China are less exposed to currency fluctuations. Meanwhile, product prices for fast-moving consumer goods industry are not so sensitive to currency changes.

A3 With a strong heritage and more than 30 years of experience in the Chinese beer market, we remain deeply committed to China. Our Chinese business has so far been very successful and we believe in the long-term potential of this market for our company.

In 2015, we were able to achieve growth in both sales volume and revenue in China, despite a volume decline in the Chinese beer industry.

We have said that we expect industry volumes to remain under pressure in 2016. But we expect our volumes to perform better than the industry, as we've had the last few years, driven by the fact that we're heavily skewed toward premium and super premium brands.

Overall, we have a strong and diversified portfolio in China, including the Budweiser brand, which had its sixth consecutive year of double-digit volume growth, and Harbin beer, which is becoming one of the most preferred brands among young adult consumers.

A4 China has seen an amazing growth story over the long term. We see it as a visionary move to change the growth model toward a more internal consumption model, and we believe it could have a positive impact for us over time.

Whenever we have a shift of this magnitude in the underlying structure of an economy, not everything will happen smoothly or as a straight line.

However, we are optimistic about the future and will work on driving sustainable growth in China by continuing to focus on building winning brands, increasing our operational efficiencies and developing a talent pool while engaging our colleagues in building a better company and a better world.

Jurgen Fitschen

co-CEO, Deutsche Bank

A1 We have observed the growth in the industrial sector lagging behind that in the service sector for some time. The process has involved challenges in commodities and mining sectors, but within these sectors there are those that have been able to withstand the headwinds better than others. There are also sectors that continue to grow rapidly, such as tourism and entertainment. Foreign firms continue to search for opportunities to invest in China, as the size of the country dictates its importance in the global market. The ability of lenders to differentiate underlying credit strength of companies is very crucial during the adjustment process.

A2 Depreciation is not a major issue for the foreign companies operating in China, as the magnitude of depreciation is relatively small. We need to keep in mind that renminbi may depreciate against the US dollar, but its outlook against other currencies such as euro and yen is uncertain. Reforms, which introduce a greater role of market forces, will inevitably raise market volatility, which is part of the maturing process of the financial system. In a more volatile environment, be it in the currency or commodity space, hedging tools, liquidity and market risk management have become more important. As a bank, we can offer our expertise and assistance in this area. China's financial markets have deepened and widened over the years and the process will continue. Higher transaction volume translates into opportunities for the financial industry as a whole.

A3 Our business in China and the region continues to perform strongly. China is a core global market for Deutsche Bank and we are deeply committed to developing our franchise here.

China has many characteristics that support a healthy pipeline of demand for both investment and consumption. The plan to bridge the gap of regional disparity spells plenty of opportunities in infrastructure investment. Also, the process of urbanization means there will be greater demand for social services and clean energy in city areas. The story of an emerging middle class is still unfolding. Private consumption proxy such as retail sales and property market data tells us that the household balance sheet has been very resilient.

A4 Economic restructuring is tackling the consequences of past credit overhang so the country can move on and allocate resources to continue to grow in a more sustainable way.

Focusing on the right opportunities during different cycles, being able to offer diversified financial services and products and being nimble will be a key to our further success. While the securitization market may grow rapidly over the next few years, a new cycle could emerge soon after, which will bring different opportunities. As a strong global well-diversified financial institution with a long history in China and the Asia region, we are ready for new market opportunities.

(China Daily 03/21/2016 page8)