Survey also urges closer China-US links to resolve geopolitical issues

Business leaders say digital transformation is the future of the post-pandemic world and want collaboration between China and the US to address the uncertainties caused by geopolitical tensions.

A recent survey of more than 130 global executives based in China shows that they largely desire to engage with consumers and customers digitally and reduce costs with the help of digital transformation as they resume their operations from the COVID-19 pandemic.

The survey, conducted by the Stanford China Program, also shows that 80 percent of the responding companies, spanning many industries and representing more than $ 1 trillion in global revenue, are hurting due to the pandemic, reducing staff due to lower demand, with small companies and non-technology companies suffering more.

While the technology and online companies are twice as likely to be optimistic about opportunities and competition in the post-pandemic world, non-technology companies are pessimistic about market size and competition, said Christopher Thomas, a visiting professor of strategy at Tsinghua University, who presented the survey at a recent webinar held by the Stanford China Program.

Wang Xiang, the president of Xiaomi Corp, said the company has seen a "strongly rebounded market" in China and many other countries, because their products, including smartphones, consumer IoT devices and internet services, are now "essential products".

Further, he said: "I think one thing maybe we want to put more focus (on) should be the online channels. That will be a very important channel in the future... not only in China, but India and other countries as well."

A big challenge for digital transformation is business to business digitalization, or B2B, said Zhang Zhiqiang, president of ABB China.

Due to geopolitical tensions, some US companies are trying to move supply chains out of China to the US or to Southeast Asia, so a lot of local companies are feeling the pressure to reduce their costs, he said.

"China is probably one of the countries that drives B2B digitalization. We clearly see there are many Chinese companies trying to be a future competitor in that field."

While working toward digital transformation, a large number of companies are worried about technology access to this geopolitical environment, and are taking concrete steps to close that, Thomas said, citing the findings of the survey.

About 40 percent of Chinese technology and online companies say that there will be issues around technology access outside China, but they say it is a problem for the future, he said.

The survey shows about one quarter of the companies say that they can obtain that same technology from China, and the vast majority also believe they can obtain the same technology from other technologically advanced countries, besides the US, such as Germany, Singapore and South Korea. A few companies say they can obtain technology globally－but that they would have to accept lower performance－if they cannot access the US-based ones.

With regard to COVID-19 and the current geopolitical environment, about 16 percent say they will do heavy supply chain localization moving to China-based suppliers as much as possible, while another 40 percent will do tweaks to their supply chain to increase resilience, and that includes moving to localization, according to the survey.

A technology "decoupling" between China and the US would be costly for companies, because the costs for research and development as well as supply chains would be duplicated and consumers will pay the price, Wang said.

Calling himself "a strong believer of globalization", Wang used making a smartphone to make his point.

"No one in this world now can make a smartphone on their own. The technology is so complicated. So, it must be global collaboration from many companies."

Without collaboration, the cost of a new technology, or a smartphone, would be very high, and many people would not be able to afford it, which is a bad thing for the technology, he said.

Though he does not see a "technology decoupling" in the near term, Wang said his company is working to "minimize the risk".

Prepared for the worst

As for Zhang, he said the issue has "low probability, but high impact on the company".

"I'm optimistic. And I think, over the longer term, logic and science should prevail, but as a business person I want to be prepared for the worst case."

Commenting on the possible decoupling, Thomas said: "As business leaders, we must continue to build these global bonds of friendship, partnership and ecosystem collaboration ourselves."

And it is "unequivocally true" that companies which try to be global are going to be more successful than those that focus on one market, he said.

It is important that companies "speak truth to power" about how the technology industry works.

"There are definitely companies for which decoupling is a business strategy. It increases the value of their company. It gets them government money and support, so they will actually want to tell the story that decoupling makes sense," said Thomas. "But there has to be an alternative story, which is the true story, that decoupling doesn't make economic sense."