APAC businesses hope for a bright 2018

Grant Thornton’s new Asia Pacific report reflects a buoyant mood across much of the region, as business optimism hits a two-year high. This is largely driven by improvements from its two biggest economies, China and Japan, and region-wide positivity on prospects for increased trade. The outlook isn’t wholly positive, however, with businesses citing ageing populations as the biggest threat to the region over the next five years. The report makes a series of recommendations to help firms navigate a range of challenges and opportunities identified.

According to the new report, Asia Pacific: trading and thriving, levels of business optimism across Asia Pacific hit net 41% in Q3 2017 – the highest since Q2 2015. In China, optimism is up to 52%, a three-year high, while in Japan it has increased 23pp compared to a year ago. The positivity across the region is having a positive effect on employment; 40% of APAC businesses expect to hire more people over the next 12 months.

“As you would expect across such a large area, there are multiple contributing factors driving positive sentiment,” said Rodger Flynn, Grant Thornton regional head for Asia Pacific.  “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. This outlook is having a positive trickle-down effect across the region. 

“At the same time, our research shows there are signs that the ASEAN Economic Community, established in 2015, is boosting business growth opportunities. And the Trans Pacific Partnership, considered a non-starter following the change of administration in the USA, is still seen by many businesses leaders across Asia Pacific as an opportunity to strengthen trade ties and boost exports.” 

Trade offers hope to APAC firms

Across Asia Pacific, 46% of businesses agree that the One Belt One Road initiative, a $5 trillion infrastructure programme that runs across Asia, the Middle East, Europe, and Africa, will provide significant growth opportunities.

This is part of a wider buoyancy about the prospect of trade creating new growth opportunities. Overall, 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. One in three remain neutral and only 6% do not believe this will be the case.

Ageing populations remains a threat

The biggest threat to the region cited by businesses is the trend of ageing populations, down 3pp from last year at 33%, but topping the list for the second year running.

The second biggest threat reported is regional conflict regarding competing territorial claims (33%); evidence that the threat of disputes escalating is weighing on leaders’ minds as uncertainty over how the disputes will be settled affects the ability to plan effectively. The third biggest threat in the research is the rebalancing of China’s economy (32%), which is particularly acute in Japan (56%) and New Zealand (46%).

Rodger Flynn adds:

“Businesses across the region are grappling with a range of economic, cultural and political challenges, despite their overall positive outlook. If left unaddressed, these challenges could overshadow the growth prospects the report has identified.

“To overcome those challenges most effectively, we make a set of recommendations to businesses. When it comes to ageing populations, there is no quick fix but businesses should consider looking for new pools of potential labour – including people looking for career changes later in their working life. 

“Likewise, to make the most of trade opportunities, businesses need to ensure contingency planning in their forecasts to account for the global patchwork of trade agreements operating on global, continental and regional levels. These agreements offer significant growth opportunities but equally, business leaders should be wary of overreliance on trade initiatives to boost growth prospects.”

Download a copy of our new report, Asia Pacific: trading and thriving.

Notes to editors:

The Grant Thornton International Business Report (IBR), launched in 1992 initially in nine European countries, now provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies. More information: www.grantthornton.global 

Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses.