Trade and investment are set for bloc boost
Chinese firms’ focus on ASEAN and RCEP markets promises many jobs, welfare
In 2005, when Chen Hao joined Guangxi Liugong Group Co Ltd, a Chinese engineering machinery maker based in Liuzhou, the Guangxi Zhuang autonomous region, the company had just taken a baby step toward overseas expansion. Just a couple of years before Chen’s joining, the company had established an office in Vietnam.
The following years have proved the company was wise to begin its overseas business from Vietnam, one of the markets in the region of the Association of Southeast Asian Nations. The ASEAN region now accounts for 25 percent of Liugong Group’s total sales in all overseas markets.
“The Asia-Pacific region, especially the ASEAN part, has registered dazzling economic growth in the past two decades, thanks to the continuous development momentum in the relatively peace and stable conditions,” Chen said. He is now president of Liugong Machinery Asia Pacific Pte Ltd, a subsidiary of Liugong Group.
“We have enjoyed rapid growth in the region over the last 18 years, and the future prospects are even more promising, especially as China aims to deepen reforms and expand opening-up at higher levels, and the Regional Comprehensive Economic Partnership agreement signed last year is expected to come into effect early next year.”
Liugong Group is among the numerous Chinese enterprises that are attaching increasing importance to the ASEAN region.
They are impressed by the huge market potential and investment opportunities in the region. What’s more, the region’s distinctive role as a gateway to a wider area, including economies participating in the Belt and Road Initiative, is a bonus.
According to a recent Standard Chartered survey of Chinese companies focusing on the ASEAN region, more than 60 percent of respondents said they are looking to expand their sales and/or production in the region by at least 10 percent over the next 12 months.
The various drivers of this targeted growth include a growing customer base in the region, and the enhanced manufacturing capabilities within it, according to a report based on the survey findings.
The report said 56 percent of respondents are focusing on the ASEAN region to gain access to the large and growing consumer market, while 44 percent are expanding to diversify their production footprint.
It also said the RCEP agreement, signed by 15 Asia-Pacific nations, including all members of the ASEAN, last November, is expected to attract more investments into the region, with 88 percent of respondents planning to increase investments by at least 25 percent over the next three to five years. About 42 percent of the companies plan to increase investments by at least 50 percent.
Experts said China’s firm stance on reforms and opening-up, as reiterated by President Xi Jinping on various occasions, has boosted Chinese companies’ confidence and willingness to go global. The signing of the RCEP is proof of China’s strong support for multilateralism and globalization, they said.
The RCEP demonstrates China’s efforts to promote and strengthen multilateral economic ties. As the world’s largest free trade agreement constituting roughly 30 percent of the world’s GDP and population, the RCEP will stimulate trade notably among markets involved in the Belt and Road Initiative in Asia, according to Jia Jingwei, vice-chairman of Swiss Re Corporate Solutions’ China branch.
Zhang Jianping, director-general of the Beijing-based China Center for Regional Economic Cooperation, stressed the RCEP is designed to eliminate tariffs on as much as 90 percent of goods traded between its signatories over the next 20 years once it comes into effect.
“The RCEP agreement will have a far-reaching impact on regional trade and investment facilitation and economic integration, as its signatories are to form closer ties and partnership,” Zhang said, adding economic benefits for the participants include not only the expected huge increase in trade and investment, but also in improvement of employment and people’s welfare.
As the pact also contains provisions on government procurement, competition policy, e-commerce and intellectual property protection, the flow of factors for production in the region is expected to be accelerated to enhance global supply value chain, he said.
Chen said his company has already established a network of sales agents covering all the ASEAN markets. Many of them have partnered with the company for more than 15 years.
The company set up its Asia-Pacific headquarters in 2011 in Singapore, and a regional after-sales service center, including for supplies of equipment components, training, and services for equipment maintenance, for the ASEAN region and the wider area of Asia-Pacific.
Given the growth potential in the region, the company set up a subsidiary in 2019 to focus on both trading and manufacturing in Indonesia, the largest nation in Southeast Asia that already accounts for nearly half of regional market demand for engineering machinery with even greater potential for growth in the future.
The company is currently conducting research on investment opportunities in other ASEAN markets, as the RCEP will significantly improve facilitation and liberalization of trade and investment in the region, Chen said.
Qian Xiaolun, head of ChoiceMMed, a Beijing-based medical equipment manufacturer that has exported products to more than 100 countries, said the company is aware of the increasing business opportunities in the RCEP region, including the ASEAN markets.
“Most of the ASEAN countries are on a fast development track underpinned by the demographic dividend and craving for economic growth at times of hard-found peace,” he said.
“Chinese enterprises have noticed the vigorous development momentum in the ASEAN region, and are increasing their presence in many industrial parks there.”
Attracted by the rich natural and labor resources and growing consumption capabilities in the ASEAN area, ChoiceMMed and its parent company, Tianjin Chase Sun Pharmaceutical Co Ltd, are on the lookout for more business opportunities in the region, apart from trying to launch and market products there currently.
Chase Sun Pharmaceutical serves a wide range of sectors including TCM granules, finished drugs, pharmaceutical adjuvants, active pharmaceutical ingredients, medical devices and health management services.
Qian predicted market demand in the ASEAN region for geriatric disease care, health management services, telemedicine, and medical devices for chronic obstructive pulmonary disease and respiratory illnesses will see substantial growth in the future.
Da Hongfei, CEO of Onchain, a blockchain tech startup, said: “Once it comes into effect, the RCEP will create a very ideal state of intraregional collaboration among the member countries, creating many new opportunities and unprecedented development models for foreign investors, including Chinese companies.
“For the ASEAN, that also means intensified economic exchanges with economies within the RCEP and beyond, which will inject new growth impetus in many sectors, such as cross-border e-commerce and payments.”
Onchain Custodian, the company’s newly established subsidiary in Singapore, is its first step to extend its business footprint in the ASEAN region, one of the most rapidly developing economies in the world, he said.
However, he also said Chinesefunded enterprises are facing fierce competition when expanding their business in the region, especially from those based in Japan, South Korea and other RCEP member countries.
Differences in business cultures and social customs between China and the ASEAN also pose challenges to Chinese companies.
Qian of ChoiceMMed said different levels of development in the ASEAN countries, as well as political instability in some areas, are preventing some Chinese companies from increasing investment in the region.