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Annual APAC Business Report Finds Hope for Bright 2018

Grant Thornton’s annual APAC businesses reports reflects a buoyant mood across much of the region as optimism hits a two-year high, driven by improvements from its two biggest economies: China and Japan.

The outlook isn’t wholly positive, however. Carrying over from the last APAC survey report 12 months ago, businesses cite ageing populations as the biggest threat to the region over the next five years.

“As you would expect across such a large area, there are multiple contributing factors driving positive sentiment,” said Xu Hua, CEO of Grant Thornton China. “The powerhouse that is the Chinese economy is becoming much more outward looking, reflected both in its One Belt One Road initiative and the movement of lower skilled jobs to neighbouring countries and this outlook is having a positive trickle-down effect across the region.

“Looking ahead to the future, our research unequivocally reveals a region feeling positive about its growth prospects - despite grappling with economic, cultural and political challenges.”

Report and survey highlights:

Outlook brightens across Asia Pacific

  • Levels of optimism hit net 41% in Q3 2017.

  • 40% of businesses expect to hire more people over the next 12 months, a three-year high.

  • China optimism at 52% - another three-year high. 44% of firms expect revenues to increase over the next 12 months, and 21% predict increased exports.

  • Japan optimism increased 9pp in Q3 2017, up 23pp from a year ago. Recent fiscal stimulus in Japan appears to be having a positive economic effect, as companies expect improved profitability (19%), more investing in plant and machinery (40%) and new buildings (36%).

Not all trajectories are heading upwards, however

  • In Australia, business optimism has slipped from 75% a year ago to 58% now.

  • Optimism in New Zealand is down to 68% which is the lowest in two years.

  • India is another economy where optimism still remains mostly positive overall at 78%, but has experienced a similar slide to Australasia, falling to its lowest level in four years.

  • In China, just 10% of businesses expect increased investment in plant and machinery over the coming 12 months. The proportion expecting to increase R&D spend has also come off a relative high of 42% last quarter to 30%.

  • Japanese business leaders are more concerned than their counterparts in any other country about a lack of skilled workers, cited by 87%; an all-time high.

Trade Prospects

  • 50% of businesses across the region are confident that regional and geopolitical events will create a business environment that will allow free trade to prosper over the next five years. Only 6% are not confident this will be case. However, one in three (34%) remain neutral.

  • When asked to name what they considered the biggest growth opportunities for the region over the next five years, the most cited was increased ASEAN economic cooperation, cited by one in three (33%) business leaders. This is up 9pp on 2016.

Opportunities in growing middle class

  • 30% cite this as an opportunity, up from 23% last year. A growing middle-class population represents a growth in consumers with spending power, and recent research has predicted that by 2030 Asia will represent 66% of the global middle-class population and 59% of middle-class consumption.

  • India’s businesses are most positive (58%) about the growth opportunity presented by rapid middle-class growth

China’s One Belt One Road initiative

  • Across Asia Pacific, 46% of businesses agree that the One Belt One Road initiative will provide significant growth opportunities.

  • Support for One Belt One Road is lower in Australia (20% agree it will provide significant growth opportunities) and New Zealand (24%), countries which are not on the historic Silk Road and which perhaps expect to benefit less directly.

Hope lives on for the Trans Pacific Partnership

  • Despite uncertainty around the future of the Trans Pacific Partnership, 26% of businesses across Asia Pacific still see it as an opportunity for the region over the next five years. This is a slight increase from 12 months ago.

  • The proportion of businesses who see it as an opportunity has fallen sharply over the last year in Australia (-40pp), New Zealand (-22pp) and Malaysia (-22pp), but it has risen in India (+17pp) and China (+10pp).

For further details, please click here to download the report.

Content provided by Grant Thornton Hong Kong Limited
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