PwC's 26th Annual Global CEO Survey - Asia Pacific

Reversal of prior optimistic sentiment

Survey respondents in our region are broadly pessimistic: 69% believe global economic growth will decline over the next 12 months. This shows a stark reversal of last year’s result when a large proportion (76%) anticipated improvement in global growth. 

CEOs in our region are bracing for the impacts of a potential global recession, continued high inflation and volatile commodity prices. Soft global demand will weigh on export-oriented economies including Hong Kong SAR, Malaysia, Singapore, Taiwan and Vietnam. China—a growth engine for the region—will likely experience slower-than-typical growth due to macro and long-to-medium term economic and other policies. The International Monetary Fund (IMF) has cut their prior growth forecasts for Asia and the Pacific to 4.3% in 2023, down by 0.8%. 

Despite the deterioration in CEO confidence, Asia Pacific remains one of the most optimistic regions about global growth - comparable to other emerging economies including Africa and Latin America. Country levels of confidence vary, reflecting consumer and business sentiment in economic fundamentals. The most optimistic countries are China (42%) and Indonesia (29%) whose CEOs believe the global economy will improve. Several markets in the region exhibit greater pessimism reflecting their CEOs view of the enduring impact of global macroeconomic factors: Singapore (6%), Australia (8%), South Korea (10%), New Zealand (13%) and India (13%).

Asia Pacific CEOs are also far less pessimistic about prospects of their own territories compared to global counterparts. The growing emphasis on national interests over global ones represents an acceleration of trends underway. However, the fundamentals of the region continue to be bolstered by trade liberalisation (for example through the Regional Comprehensive Economic Partnership) and markets welcoming foreign direct investment.

CEOs in larger Asia Pacific territories show the highest level of optimism in their nation’s economic prospects compared to global CEOs: China (64%), India (57%) and Indonesia (50%). China’s health and economic policy measures appear to promote its gradual recovery by the second half of 2023 and into 2024. At the same time, the global downturn would have less impact on countries whose economic prosperity is buffered by significant domestic demand. This includes Indonesia and India—the latter which is increasingly seen as a complementary manufacturing hub for the region.

Prioritisation of short-term profitability

Asia Pacific CEOs’ pessimism translates into a clear mandate to focus on the ‘here and now’: preserve operating profitability and immediate cash flow generation and defer longer-term value creation.

When asked about threats Asia Pacific CEOs think they will be exposed to over the next 12 months, inflation, macroeconomic volatility and geopolitical conflict stand out, similar to their global peers. CEOs across the region perceive threats differently depending on economic maturities and nuances of their operating environment. Differences are pronounced within the region: Australia and Japan CEOs worry more about cyber risk, while geopolitical conflict is the top threat for CEOs in China, Hong Kong SAR and South Korea.

Perspectives change when considering the medium term (defined as five years). Cyber risk and climate change are seen as more important over this horizon, especially for Australia, China, Malaysia and New Zealand. Climate in particular is progressively impacting operations through a cycle of disruption of supply chains and inventory. 

Notably, smaller companies (revenue less than US$100 million) feel least exposed to climate and cyber risks in the short and medium term compared to larger companies. Given their relative investment capacity, smaller companies will likely sharpen focus on the ‘here and now’ profitability to remain viable. 

Transform to remain viable

In parallel to near-term threats, Asia Pacific CEOs recognise the need to reinvent their businesses to stay relevant amidst large-scale disruptions, and to thrive in a climate-challenged world. This defines the dual imperative: to balance short-term profitability and long-term transformation.

Our survey shows that 53% of CEOs in the region think their companies will not be economically viable within a decade from now, if they continue on their current path (14% higher than global CEOs). More than one in three believe their businesses will not be economically viable within six years. 

The urgency is even stronger for South Korea, Japan, China and Hong Kong SAR, where about three quarters of CEOs share this sentiment.

Asia Pacific CEOs also understand that their transformation journey must address the disruptive forces impacting industry from multiple fronts. They must keep pace with their customers (56%), appease regulators (54%) and manage labour/skill shortages (50%). 

The need for transformation is further highlighted by how Asia Pacific CEOs split their time. Driving current operating performance consumed the biggest share of their time (24%). Given the chance to redesign their ideal schedules, Asia Pacific CEOs would rather spend more time evolving the business and strategy to meet future demands (25%).

This balancing act extends from their calendar to the allocation of corporate resources. Asia Pacific CEOs have made investment into upskilling (73%) their number one priority, followed by automation (71%) and deploying advanced technology (67%). While being a lower priority, Asia Pacific CEOs are more likely than their global counterparts to invest into climate change measures and the metaverse. 

Challenges in people experience and culture

To successfully execute the dual imperative, Asia Pacific CEOs understand they must place people at the heart of their business— evidenced in the prioritisation of upskilling. What else can they do to engage and inspire their people?

This year’s survey suggests some warning signs which also represent clear areas of opportunity. Similar to their global peers, less than half (41%) of surveyed CEOs in the region think their employees’ behaviours are usually aligned with corporate values and directions (i.e. 81-100% of the time). This suggests their employees feel disconnected from the purpose of their work. The level of misalignment is emphasised when comparing private (38%) and public companies (46%). This reflects the relatively less structured approach for smaller companies in managing their people and culture experience, compared to their more scrutinised public peers. 

For employees today, job satisfaction is much more than fair financial reward. Our latest Asia Pacific Workforce survey highlights that workers in the region want more meaningful work. They want to be able to bring their authentic selves to work in an environment consistent with their values. 

Asia Pacific CEOs also have questions about the degree of empowerment in their workforce. About half do not often encourage debate or dissent, nor do they tolerate small-scale failures. 73% note their leaders did not often make independent strategic decisions for their function or division. In many organisations, optimal conditions do not appear to be in place for managers and employees to independently cultivate new opportunities or respond to disruptive threats. This indicates a demand for transformative leadership. 

Desire for broader collaboration to drive business value

The diversity and complexity of today’s business challenges is placing a premium on the ability to collaborate across typical boundaries. Asia Pacific CEOs agree—they are up to 6% more willing than their global counterparts to forge partnerships outside established partner types. When they do collaborate, the goal is primarily to create new sources of value rather than to solve societal challenges with one notable exception: partnership with non-profit organisations (NGOs).

Compared to global CEOs, Asia Pacific CEOs are looking at greater collaboration with government and industry partners - both to drive value and address societal issues (5-6% more). 

This is even more pronounced for companies with revenue between US$1 billion and US$10 billion, and with revenues of US$10 billion+. These large enterprises are 7-22% more willing than companies with revenue less than US$100 million to collaborate for societal change. Private companies in Asia Pacific also have a greater willingness to collaborate particularly with government, NGOs and established companies (4-7% more) compared to their public counterparts. This may be due to more limited access to capital and capabilities from a private company perspective.  

Asia Pacific CEOs prioritise climate change (3% more than global peers) over education (9% less than global peers) when partnering with non-business entities. This trend is most obvious in Australia, China, Japan, New Zealand and Singapore. CEOs of public companies in Asia Pacific also pay more attention to climate change—17% more than private companies. This reflects increasing stakeholder expectations in the race towards Net Zero. 

Collectively, this indicates the potential for the commerciality of ESG imperatives in the region. Collaboration is a potent accelerator for progress. PwC’s work in ESG strategy development suggests organisations are best able to create business and societal value in tandem when they tackle partnering and ecosystem building with rigour and sophistication. When collaboration is well orchestrated and aligned to capabilities, its potential to address systemic challenges can be accelerated.