Report: Mid-level Chinese firms lead global peers

China's middle market companies — those with annual revenue of between US$1 million and US$3 billion — are expected to lead their global peers in growth, initial public offerings and the adoption of artificial intelligence, underpinned by the Belt and Road Initiative and China's regulatory policies, a report issued today by consultancy EY said.

The report highlighted China's efforts to bolster the development of the new economy and its support of unicorn companies through tax breaks and prioritizing their IPOs.

Data showed that 43 percent of China's C-suite executives expected the middle-market companies to grow by more than 10 percent over the next 12 months. By comparison, only 24 percent in companies of the same scale throughout the world expected the same growth rate. 

"The Belt and Road Initiative continues to boost the confidence of Chinese companies in overseas expansion despite the uncertainties in international trade," said Li Kang, TMT Assurance Partner at EY China.

The survey found more than one-third of respondents see entry into new international markets as their strategic growth priority, with more than one-quarter citing overseas expansion as central to evaluating new business ventures.

Forty percent of respondents see regulation as the prime driver of innovation, compared with 24 percent elsewhere. And although China’s burgeoning business strength follows its shift from a controlled economy to freer markets, 28 percent believe that more regulation would be the best government action to boost growth. 

The report also showed that 78 percent of the responding company leaders are planning IPOs — almost twice the global level and a further sign of the middle market’s bullishness. 

"As economic power pivots East, Chinese entrepreneurs are harnessing domestic technology expertise, home-grown talent and process efficiencies to fuel growth," said Terence Ho, strategic growth markets and IPO Leader at EY China.

EY highlighted that Chinese respondents lead their global peers in the adoption of AI, with 10 percent already using it and a further 77 percent planning to do so within two years. Almost all Chinese respondents say they will have implemented AI by 2023. 

This marks a huge turnaround on last year, when 91 percent said they would never use robotic process automation, another cognitive technology, EY said.

"This shift, while reflected across the world, is more significant in China. The middle market is fast embracing technology as an enabler," Li said.

"However, with over half of Chinese respondents earmarking technology investment for the more traditional roles of improving process efficiencies or improving financial data, opportunities exist to invest in the more cutting-edge areas of new technology, such as creating new business models and improving the customer experience."

Around one-third of the respondents consider tech as the biggest contributor to improved productivity, second only to economies of scale. 

When it comes to means of increasing innovation, the customer is much more prominent, as 41 percent respondents in China prioritize the use of customer data, compared with 28 percent elsewhere.