Photo: Bloomberg
The majority of Chinese companies focusing on Asean expect to see their businesses grow in the region over the next 12 months, according to a survey commissioned by Standard Chartered.
The survey was done for the bank’s Borderless Business: China-Asean Corridor report, which explores potential opportunities for cross-border growth between both regions.
The survey, which was conducted in April among senior executives at 43 China-based companies, revealed that the same companies consider Singapore and Malaysia as the best markets for expansion opportunities in Asean.
To be sure, 60% of respondents from the survey say they are focusing on expanding in Singapore to capture sales and production opportunities, second to Malaysia at 65%, and followed by Thailand’s 53%.
Around 47% of Chinese corporates are also keen to tap into Singapore as a major regional procurement hub, and 44% of the same companies indicate that they are looking to build a regional research and development (R&D) or innovation centre in the country, as they look to expand across Asean.
In terms of the most important drivers for expansion into the region, the survey found that 56% of the companies polled prioritised access to the large and growing Asean consumer market. Some 53% of the same companies found local government incentives and support for project sustainability and stability to be important, while 51% of the companies saw a reliable supplier base as one of the more important reasons to look into expansion in the Asean region.
In addition, 47% of the respondents agreed that the network of Free Trade Agreements (FTA) makes Asean the ideal base to access the global markets.
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The Regional Comprehensive Economic Partnership (RCEP) is also expected to attract more investments in the region.
On this 88% of respondents indicated that they are planning to increase their investments in the region by at least 25% over the next three to five years.
Within the same survey, it was found that the same companies recognise the risks within the region, with 70% citing the Covid-19 pandemic or other health crises.
Some 67% of companies view the region’s geopolitical uncertainty and trade conflicts, while another 67% of companies view the slow revival of the region’s economies and drop in consumer spending as concerns pertaining to the region.
Furthermore, 58% of respondents agreed that adapting their business model to industry practices and conditions within Asean are one of the most significant challenges when it comes to entering the region within the next six to 12 months.
Other challenges perceived include understanding regional regulations, payment methods and infrastructure (56%), as well as building relationships with suppliers and adapting supply chain logistics (56%).
That said, to mitigate the risks and challenges, 58% of respondents say they have considered executing digital transformation programmes, while another 47% have looked at driving sustainability and environmental, social and governance (ESG) initiatives. Another 44$ of respondents say they are exploring entering new partnerships and joint ventures to increase their market presence when entering the Asean region.
To support their growth, around 60% of these companies say they are seeking banking partners with strong cash management capabilities, while 56% of these companies have looked into extensive trade financing services. Another 56% of these companies are exploring corporate financing and capital-raising services.
