The 18th National Congress of the Communist Party of China begins on Thursday. It will usher in the country's new leadership lineup and will in all likelihood have an important influence on economic development into the next decade - including the market environment for international corporations operating in China. In the run-up to the congress, China Daily conducted a survey of international companies on the event and their expectations for the country. The survey contained five questions.

Q1: Given that China‘s economic growth cooled to a three-year low of 7.4 percent year-on-year in the third quarter, do you think the country can maintain relatively fast expansion during the coming decade? And do you think China will continue to be an important growth engine, both for the global economy and for your company?

Q2: As wages and operational costs rise, China’s export growth is no longer as robust as before and domestic consumption is still not strong enough to generate as much growth. Have these developments prompted your company to either delay or cancel any investment plans in the country? If not, why not?

Q3: What are your expectations for your company‘s performance in China this year and over the next five years in terms of sales and profits, in manufacturing and services? How do you view the performance of the industry in which your company operates?

Q4: What is your company’s greatest concern about doing business in China?

Q5: What measures do you expect from the new leadership to help improve the business environment for your business or your industry?


Frederic Kahane

general manager, Air France-KLM, Greater China

1. In the aviation sector, the Chinese market remains extremely dynamic. With the need for air travel surging over the last 15 years, the growth of this market will remain strong in years to come. Today, domestic travel accounts for 85 percent of the total traffic in China, but this will undoubtedly evolve in favor of international traffic. Despite a gloomy economic situation in Europe, Air France, like KLM, continues to invest in China. As such, in April Air France inaugurated the first air link between Wuhan and Europe, offering services three times a week, following the opening of routes to Hangzhou in 2010 and Xiamen in 2011. It is not typical for an airline to open three new destinations in the same country over a span of three years, so it is obvious that China remains a strategic market for Air France-KLM. The Chinese market represents a challenge for the future and our ambition is to become the leading European company in the country and the preferred airline of Chinese customers.

2. Like other companies, we suffer from high fuel prices, which obviously affect the long-haul flights particularly, and we therefore are mindful of the implementation of a bonded fuel policy, especially in the secondary cities. In addition, we remain highly concerned about the rising operating costs at various airports as well as those of service providers.

3. Apart from our nine destinations in Greater China, Air France-KLM will continue to watch closely the fast-development of secondary cities, which we believe will generate a great deal of traffic growth toward Europe. Recent examples are Hangzhou, Xiamen and Wuhan, which are seeing the emergence of first-time travelers (to Europe). With seven destinations in the Chinese mainland, Air France-KLM is already well positioned in the market, and we are now working to consolidate these destinations. Also, our development in China, especially in secondary cities, will be pursued with our Chinese partners - China Southern, China Eastern and Xiamen Airlines, which will join the SkyTeam alliance on Nov 21. Thanks to partnerships such as these, we are offering 26 Chinese destinations this winter through code-share services with China Southern and China Eastern, connecting to our Paris-bound flights.

4. Chinese airports are not yet real hub platforms for connections, especially between domestic services, representing 85 percent of China's air traffic, and international flights. With our partners China Southern, China Eastern and Xiamen Airlines, we aim to develop more connecting traffic by putting in place a smooth transfer for our customers. It is a process that involves not only airlines and airports, but also customs, immigration and quarantine. There is still much to do in this area, and the development of flight connections also requires an improved situation in terms of punctuality.

5. Indeed, we are aware of the important leadership transition at the end of 2012 and early 2013. In 1966, Air France was the first European airline to serve the People's Republic of China, two years after the establishment of diplomatic relations between the countries. This long history has enabled us to build excellent cooperation with the Chinese authorities, and particularly the Civil Aviation Administration of China. We are confident that we will continue in the same direction. Besides, the 12th Five-Year Plan (2011-15), mapped out by the CAAC in April 2011 with five priorities - namely, continued safety improvements, the development of airport resources and optimization of air-traffic control, traffic growth reaching 450 million passengers in 2015 (an increase of some 13 percent) the emergence of general aviation, and the reduction of energy and carbon dioxide emissions - will ensure continuity in the context of the upcoming change. Air France-KLM counts on joining the effort and contributing to these priorities.


Ulrich Walker

CEO of Daimler, Northeast Asia

1. Indeed, China's economy has slowed down quite a lot. But in my view this is partially caused by the sluggish international demand so that China's exports have decreased dramatically, despite the seasonal rise in September or so. On the other hand, this was the intention of the macroeconomic control measures implemented by the government since the end of last year. What disturbs me is that the economy has declined a littler faster than expected. Nevertheless, I don't expect a hard landing.

On the contrary, I have every reason to believe that China's economy will continue to grow at a relatively rapid pace, but maybe not at 10 percent, as during the past decade. First, the urbanization process is far from finished. The current urban ratio is slightly above 50 percent. If it is going to be 80 percent, China still has to urbanize more than 25 percent of the population at least, something like 300 million people. This will generate higher demand for housing, transportation, household appliances and other items. Second, China's industrialization process is not yet complete. There are still many cities that need to improve their infrastructures, such as building subways and new airports, enlarging railway stations and making the highway networks denser, not to mention new hospitals. This demand will last at least for two decades. Third, as the Chinese government has been doing for a while, the economic restructuring will create new growth momentum and enhance productivity. Here, I see great potential.


In this sense, China will continue to play a major role in the global economy and continue to be the most important engine, as it contributed more than 20 percent of world economic growth in 2011, according to the National Bureau of Statistics.

As for the auto industry, China is extremely important globally. Since 2010, China has been the world's largest automobile market and has become an important pillar of Daimler's worldwide success. It is now the third-largest market for Mercedes-Benz passenger cars and one of the top five markets for Daimler Trucks and Mercedes-Benz vans, thanks to successful localization. Looking further ahead, China will play a big part in Daimler's 2020 strategy for being the No 1 premium auto company in terms of brand, products, unit sales and profitability.

2. China's overall automobile market still has many opportunities for growth. Vehicle ownership in the US is 800 per 1,000 people, but in China the number is only just approaching 80, representing great room for domestic expansion. As just mentioned, the urbanization process is taking place across all regions of China, along with the continued expansion of the middle class. This represents further potential in the premium segment in China as it accounts for around 15 to 20 percent of cars in developed countries, but is still quite low in China at 5 percent. Chinese consumers are also becoming more sophisticated, and are not only very brand-savvy but also appreciate the inherent quality of premium products. There is also a shift toward younger consumers with stronger consumption power, who also are increasingly embracing the flexibility of financial solutions.

Daimler's local presence includes a number of initiatives across China, covering our complete range of operations in cars, vans, and trucks, spare parts, and financing. In all of these areas, Daimler is increasing its investment in China, which started with a strategic plan to invest 3 billion euros ($3.8 billion) with our Chinese partners in plant expansion, new engine plants, and dealership network development. We have continued confidence in the sustainable development of our range of investments in the growing Chinese auto market.

3. As a high-end manufacturer we need highly trained, dedicated personnel. As China's business environment develops, the market for talented workers becomes a big challenge. That is why our long-term strategy for sustainable growth includes a strong focus on local human resources and active investment in the local workforce.

To ensure that our level of service also keeps pace with the innovation of our cars, we have a number of training and educational initiatives in China, including the Daimler China Automotive Academy and a new training center in Xi'an, Shaanxi province. Another new training center will be established in Shanghai in the coming years, the biggest MB training center outside Germany. We have the most innovative training program, based in China and spanning three continents with the Carl Benz Academy launched last year as a pilot program.

4. We are very confident of a smooth transition to China's next leadership. Under the new leadership, we expect that China will continue with its current policies as well as implementing the changes needed to adapt to the changing environment in the future.

The 12th Five-Year Plan that started in 2011 already provides a good foundation for the continuity of economic goals as the government transitions. The current plan's overall target of higher quality growth resonates with Daimler's core business philosophy, including specific key points such as increased energy efficiency, energy conservation, environmental protection, promotion of high-end manufacturing, as well as a focus on clean-energy vehicles.

China's auto industry has boomed over the past few years, with many independent companies producing vehicles for domestic consumption based on low cost. Now, as we're seeing growth slow to more sustainable levels, the government is also promoting quality over quantity and calling for industry consolidation to pool R&D resources to improve the quality of Chinese autos. This is a welcome development that will help produce a more sustainable domestic auto industry that will also be able to compete at an international level. The government has shown support for innovation in the auto industry with subsidies for more efficient autos and alternative-energy vehicles.

5. Daimler has also invested in the development of a new all-electric vehicle with our partner BYD, designed in China and built for the Chinese market. The Denza will open up a new sophisticated segment in the electric vehicle market and we're very pleased that the government is continuing to provide incentives to encourage the use of EVs and is also building up the necessary infrastructure with charging stations.

We feel we are supporting those initiatives and making a strong contribution to raising the bar of the China auto industry with our joint venture investments. This includes R&D and production of our latest models in China, as well as building two engine plants, which represent the best of our technology and the latest in energy efficiency.