China is investing more in cutting-edge technologies and innovation, as well as expanding in emerging industries

The booth of Accenture at an exhibition in Hangzhou, capital of Zhejiang province, on Sept 18, 2018. (PHOTO PROVIDED TO CHINA DAILY)

Editor's Note: China's economy has maintained stable growth, increasing 6.3 percent year-on-year in the first half of 2019. China Daily invited senior executives of multinational companies to share their views on the nation's economic development and outlook.

Q1: Overall Chinese economic growth has slowed in recent years, but the top-line numbers remain relatively robust. This means some sectors are growing well to compensate for any hard-hit sectors. In what areas of the Chinese economy do you plan to increase investment or employment?

Q2: Retail sales and consumption have been a bright spot of the Chinese economy. What business opportunities do you see as China continues to pursue higher-quality growth, which is increasingly driven by services and consumption?

Q3: What do you see as the most resilient part of the Chinese economy and how do you plan to align your business with it?

Q4: Uncertainty about trade with the United States has created risks in the Chinese and global economies. How has your company adjusted to these uncertainties? Which sectors of the economy are the most promising and which are most affected by trade conflicts?

Q5: The government has announced a series of policies to further open the economy to foreign investment, to transform finance, and to promote private enterprises. How are you planning to take advantage of these policy changes?

Q6: Many observers believe China is on the brink of a significant technological transformation. How does your company plan to take advantage of tech opportunities in China over the next decade?

Zhu Wei, senior managing director and chairman of Accenture China. (PHOTO PROVIDED TO CHINA DAILY)

A1 Clearly consumption plays a big role in spurring the Chinese economy and enterprises' growth. Meanwhile, strategic emerging industries like high-end equipment manufacturing, new information technologies, new energy and high-tech industries have been expanding faster in the first half of this year.

We believe that government bodies, businesses and others will increase investments in such areas, speed up the pace of transformation and drive innovation further in more sectors. And we also believe that during the process more value can be released from the value chain from R&D to delivery, from prototype to application, from best case sharing to open innovation.

In such a context, Accenture works with Chinese companies to practice what we call wise pivot - to transform their core business and scale the new business activities. We have opened an innovation hub in Shenzhen and a digital hub in Shanghai this year. Together with some investments and acquisitions in the fields of artificial intelligence, digital marketing and industry design in recent years, they are our latest efforts to build innovation abilities in China and take root in the local ecosystem partnering with clients, startups, institutes and other players.

A2 China's economy is shifting from being investment to consumption driven. In the future the pace in consumer markets will be faster and the competition more intense. New trends led by digital and intelligent technologies, and consumer behaviors are reshaping services.

Both international and Chinese companies are investing to improve their insights and capabilities to take advantage and stay relevant to Chinese consumers. Accenture helps clients to become "living businesses" - stay relevant and generate new revenue streams by becoming more human-centric, delivering individualized relationships, pursuing new customer experiences and protecting customer data - and more importantly, building digital trust without creating new bias by technology.

A3 China is demonstrating its great resilience, switching gear from its old growth model to high-quality growth. It's not only about removal of overbuilt capacities, it also focuses on investing in advanced technologies and innovation, as well as expanding in emerging industries.

The courage to take reforms and the continued pursuit of the new driving forces are the backbone of such resilience in the Chinese economy, whether it is to facilitate enterprise transformation, upgrade industries, unleash consumption potential or restructure development models.

So for consultancies like us, we are determined to explore uncharted waters together with our clients in China. We are investing heavily to build or acquire new capabilities to help Chinese enterprises apply innovation to unlock the value trapped in limited use of digital technologies, in underused assets, and in failure to engage in profitable partnerships in ecosystem.

We are also making changes to become more resilient ourselves, especially how we operate and how we deliver our services. We are becoming leaner in structure and nimbler in the digitally contested consulting and IT services market. We can move toward deeper engagement to co-create and share tangible outcomes with our clients.

A4 Forty years into its reform and opening-up, China is deepening the market-oriented reform, encouraging innovation, supporting the private sector and attracting foreign investment with all these policies.

Accenture has witnessed many such initiatives and has benefited from them, growing into a team of some 15,000 people in China today. We have witnessed the State-owned enterprise reforms, the rise of privately owned companies, the globalization of Chinese companies, industrial upgrading, and today's digital transformation.

We feel confident that past experience can prepare us to cater to economic uplift and serve Chinese clients both locally and globally. We are fostering innovation within the local ecosystem, exploring next-generation disruptive technologies, going deeper in industrial applications, building up inclusivity, helping the workforce adapt to the new digital environment and ensuring the fair use of data and personal information.

A5 Technological revamp led by digital technologies is indeed bringing disruptions to various industries and constantly changing the competition landscape - and the winner won't necessarily take all. As Chinese companies embrace the digital transformation that is proliferating in more fields, many imperatives still need to be addressed properly and in a timely manner for them to take full advantage of the dynamics of the Chinese economy.

Companies will harness digital technologies to enhance operational efficiency and innovate at scale, support a new way of working, and maintain perpetual relevance through constant intelligent engagement. Only companies able to transform from traditional growth to new growth will become market champions.

At Accenture, we are looking deeper into such opportunities and seeing rising demands from Chinese companies to apply new technology combinations at scale and at speed to increase agility and efficiency. Moreover, we are always practicing at the intersection of business and technology to bring the latest management concepts to life, apply new technologies such as applied intelligence, analytics and robotics, tailor innovative new products and services, and streamline organizational changes in every aspect of the transformation journey with holistic and comprehensive approaches.

Guo Ruyi, managing partner, China TH Capital. (PHOTO PROVIDED TO CHINA DAILY)

A1 Over the past decade, we have seen the consumer sector give a big boost to the Chinese economy, but as the benefits of population growth and mobile internet penetration fade, we are seeking new opportunities in three areas.

Better lives - education and healthcare will be our focus for the next three to five years, as these two sectors are important aspects of people's lives, and we need both technological breakthroughs and more capital to develop the foundations of our society. We have already witnessed increasing numbers of venture capital and private equity firms looking into investment opportunities in these two areas, and new unicorns are emerging.

Better work - efficiency should be the key word for the next five to 10 years for the Chinese economy. To enhance efficiency in all industries, we need improvement in reorganizing supplies and promoting tech-driven businesses. New technologies, such as artificial intelligence, big data, cloud computing, 5G and automation, and supply-side reform, should always be our focus and we need more talents to understand the technology and help entrepreneurs translate their business to the capital market.

Globalization - we still believe that the trend of globalization is unstoppable. We now have the most Fortune 500 companies in the world, more and more Chinese products and business models are recognized all over the world. As the Chinese government promotes the Belt and Road Initiative and our products and services become more competitive, we believe that a lot of entrepreneurs will seek opportunities to expand their business to other regions of Asia, and eventually build up global businesses. We need international talents to help understand the local market, and to help our clients reach out, or help business leaders from other regions learn from their China counterparts.

A2 China's consumption is entering the next stage of competition with three key concepts.

Consumption stratification - different people in different situations have different demands. More specifically, those who live in the suburbs purchase cheaper products via Pinduoduo, while those who live in first-tier cities prefer to pursue more sophisticated lifestyles. There is no "winner takes all" scenario in the consumer industry, but diversity and uniqueness will be key.

The rise of brands - brands boom if a country's per capita GDP exceeds US$8,000. China's new brands in the next few years will enter a blowout type of explosive growth stage, as GDP per capita in China achieves the right level.

Spiritual needs - since the post-90s and post-00s generations are more willing to build self-identity through consumption, consumption that expresses individuality and personality is becoming more important. We believe that trendy products and ACGN(animation, comic, game and novel) culture will present exciting opportunities for new growth.

Based on these areas, massive opportunities in China's consumer sector are expected to release more industry dividends. In addition, service consumption such as travel and education will develop.

A3 We have gone through several economic cycles in the past seven years, yet one trend remains stable - technology is gaining importance in business.

On the supply side, R&D expenditure in relation to GDP has grown at a compound annual growth rate of 6 percent in recent years, the highest among developed countries globally, especially considering the speed at which China's GDP itself is growing.

More than 75 percent of R&D personnel and funds are distributed to business enterprises, also the highest among major global economies, in line with our observation of talents flowing from academia to industry.

On the demand side, on a macro level, IT and artificial intelligence comprised almost a quarter of the private equity and venture capital investments in the first quarter this year, highest among all sectors. On a micro level, we see all kinds of capital coming into the sector. Most of our private equity and venture capital partners have set up tech teams, and about 50 percent of tech deals we closed in the past year involved corporate venture capital, and some sovereign-backed funds invested solely in the tech sector in 2018.

To capture this long-lasting opportunity, we have been investing heavily in tech startups since 2016, which now comprise of about 30 percent of our customer base. We expect the number to rise further.

A4 There are some uncertainties about trade, but for our clients, most "new economy" companies are less affected. We have observed different responses throughout the sectors we cover. For healthcare and education, there is strong demand in the domestic market, so service providers are less affected. For transportation and logistics, there is a strong requirement for infrastructure upgrading and intelligent transportation.

Logistics in China will see strong growth, and investors are starting to show interest in this sector. For tech innovation, we believe that China now has an abundance of talents, and a willingness to support proprietary innovation, so even if some companies in this sector are under pressure from Sino-US trade friction, it is essential to have as many Fortune 500 tech companies of our own in the long run as possible.

For the consumer sector, the situation is different for companies with global businesses. Consumer brands that have large US market needs face the greatest uncertainty and investors are more cautious about investing in these companies. However, companies that are content driven or offering products and services to other overseas markets than the US are still drawing more attention from investors.

Institutional investors are constantly shifting their interests among different sectors, so it is not unusual that we make some adjustments in our approach to help our clients. First, we focus on talking to new investors. Second, we reach out to some of our clients' global partners to seek investments from them, which can hedge some of the risks caused by trade uncertainty. Last, we do more market research and try to advise our clients on their strategic plans, especially the steps they should take to expand businesses outside of China.

We believe certain trends will never change - globalization and technology evolution, so we will continue to serve new economy companies and invest heavily in these two trends.

A5 We have observed that these policy changes have already come into play in some sectors, such as cloud computing, healthcare, enterprise services, AI, automated driving and the internet of things. We are glad that our investor pool has grown, as the government guide fund, sovereign funds, pension funds and direct investment funds from banks and insurance companies are joining the group.

As a financial adviser, it is always our duty to help clients find the right investors. Now that there is new capital emerging in the market, we should keep a close relationship with them, to better understand the investment criteria and decision-making process of the funds, and to help our clients get financing from the capital market.

A6 Since the reform and opening-up, the Chinese economy has been benefiting from technological advancement, but what has changed is where it comes from. In the past 40 years, most came from imports, from following mature technology bought or exchanged via international trade. Looking ahead, technology will come from proprietary innovation. In this sense, we believe the statement is true.

We believe that China's huge population base contributes to a large data set, a large talent pool, and large user density - all of which are key prerequisites for tech investment success. We plan to focus on sectors already benefiting from these factors as well as policy guidance - AI to start with, 5G and semiconductors to follow.