Chinese CFOs Cite Policies and Regulations as Top Sources of Risks

Global economic uncertainty appears to have taken a toll on market sentiments, with over 50 percent of surveyed Chinese CFOs saying that they have become less optimistic about economic prospects over the past three months, according to Deloitte's latest China CFO Survey.

Over 70 percent of surveyed CFOs claimed that they had made adjustments to their business in response to China adapting to slower and more moderate economic growth, which many describe as the “New Normal.”

The CFO Survey was conducted from January to March with the objective of gauging opinions from China CFOs on a wide range of topics, including their perspectives on economic prospects, growth drivers, and challenges their businesses face.

The survey involved 152 CFOs from a diverse spectrum of industries, spanning consumer business and products, manufacturing, construction, media/entertainment, processing/chemicals, automotive, healthcare, investment banking, pharmaceuticals/life sciences, technology, telecommunications, and tourism.

“The survey has provided us with the assurance that companies are now much more mature in responding to risks and challenges than when they were in previous economic crises,” said William Chou, National Managing Partner, China CFO Program, Deloitte China. “Our survey indicates that most companies have taken proactive measures against potential risks, and they have put a wide spectrum of risk factors under their radar screen, which will enable them to adapt effectively to external shocks.”

In the survey, China CFOs cited further economic turmoil as the top potential risk factor, followed by detrimental government policies and regulations.

In terms of industrial challenges, companies are most worried about competition and market growth and structure, and this may be indicative of the need for companies to build their core strength and identify new sources of growth under global economic uncertainty and China’s “New Normal.” It is worth noting that a significant portion of respondents have expressed concerns about talent, which is pivotal in strengthening companies' core advantages in know-how, innovation, and experience.

In view of these challenges, the majority of surveyed CFOs claimed that they would focus on revenue growth and cost reduction. For CFOs themselves, primary focuses will mainly concern strategy planning and execution (66.7 percent of respondents), followed by capital and liquidity management (48.8 percent of respondents), and investments and initiatives (46.7 percent of respondents).

Chou concluded that “there is a paradigm shift in the role of CFOs, who are now paying more attention to corporate strategies, versus their traditional financial reporting and capital management roles.

“In the first quarter of 2015, worldwide monetary policy and currency wars combined with a crash in the price of oil created significant volatility in the financial markets. Companies also need to improve their operation flow and raise capital to support their business development. In that regard, exchange rate, process efficiency, and transaction support are also important challenges for financial departments.”

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