China CFOs express pessimism to U.S./Europe economy, but optimism towards China

Published: 13 June 2013

China CFOs hold antithetical perceptions towards the economic outlook in the U.S./Europe against China, with over 50 percent of CFOs sceptical about the recovery in the U.S. and Europe. Contrarily, the majority of CFOs are confident that China will manage to meet its annual GDP target over the next few years. Over the next 12 months, CFOs will focus on cost reduction, financing and liquidity and capability development as they continue to face substantive funding challenges, according to the latest China CFO survey conducted by Deloitte.

Concluded in February 2013, the survey had a participation of over 200 CFOs from a wide spectrum of industries, such as consumer products, automotive, health care, insurance, retail and real estate. The survey has a meaningful pool of participants, with over 60 percent of their companies having annual income of over RMB 1 billion. Surveyed questions were designed to cover comprehensive issues, including economic perception, industry challenges, strategies and talent development.

While China is showing signs of reverting to faster growth, China CFOs remained unsettled by economic uncertainty, which they also cited as one of the major risk factors for their business. In contrast to the similar survey last year, however, CFOs believed that the global economic lethargy is unlikely to weigh heavily on their financial projection. Almost 60 percent of CFOs rejected the statement that their financial projection will decline under the prevailing economic environment.

"Survey results reflect the cautious tone of CFO perception towards the global economy, combining persistent worries about the western economy with the relative optimism for China.
Business leaders seemed to have become accustomed to shorter economic cycle as they highlighted that their financial projection will not be too adversely affected by the current lukewarm economic tone," said Danny Lau, Leader, Deloitte China CFO Program.

When it comes to industry challenges, CFOs were most concerned about competition (60 percent), followed by talent (56 percent) and industry regulation/legislation (51 percent). With regard to company specific challenges, over 50 percent of CFOs were most unnerved by capital/cost availability, followed by inflation (40 percent) and accounting/regulation (38 percent). From an internal management perspective, 57 percent of CFOs indicated that they were most troubled by talent related issues, followed by revenue growth potentials (50 percent) and cost reduction (40 percent).

"CFOs appeared to be pressured by shareholders to achieve growth and during volatile times, CFOs also put extra efforts to manage costs. China CFOs need to rely on outstanding talent to drive business growth, but talent shortage is so pervasive that talent development and human capital cost management become key priorities for business," he added.

When running their finance functions, one third of CFOs found it difficult to get adequate influence on business strategy and they also had a tough time obtaining sufficient funding and liquidity, and managing costs of capital.  

"The survey has also attested other systemic challenges faced by Chinese companies, including funding difficulty and regulation vagary. It is important for CFOs to develop new funding channels and work closely with their relationship banks. A proper regulatory review is also necessary before they engage in any new projects," Mr. Lau noted.