KUALA LUMPUR – A significant majority of Chinese companies focusing on ASEAN expect business growth in the region over the next 12 months, according to a survey conducted for Standard Chartered’s “Borderless Business: China-ASEAN Corridor”, a strategic report that explores high-potential opportunities for cross-border growth.
The study found that Malaysia tops the list on expansion opportunities for 65% of Chinese companies looking to scale up their sales and production operations in ASEAN. 72% of Chinese businesses currently sell and export to Malaysia.
Malaysia’s long-standing and strong economic ties with China presents a major growth opportunity for Chinese companies looking to internationalise.
Recent data released by the Ministry of International Trade and Industry indicated that Malaysia is China’s largest trading partner for the 12th consecutive year in 2020 with total trade valued at RM329.8 billion, accounting for 18.6% of Malaysia’s total trade, compared to 17.2% in 2019.
The region’s fast-growing consumer markets, rapidly maturing supplier landscape, and regional trade links offer Chinese companies a strong growth potential in sectors such as high-value manufacturing, energy, and digital services.
Access to the large and growing ASEAN consumer market (56%), local government incentives and support for project sustainability/stability (54%), as well as the presence of a mature and reliable supplier base (51%) were regarded as key drivers in entering the ASEAN market.
The Regional Comprehensive Economic Partnership (RCEP) is expected to attract more investments into the region and will be a boon to Malaysia’s export growth. 88% of respondents plan to increase their investments by at least 25% into ASEAN over the next 3 to 5 years.
The survey also showed companies recognising a wide range of risks associated within the region. The top three risks identified are:
• the COVID-19 pandemic or other health crises (70%),
• geopolitical uncertainty and trade conflicts (67%)
• slow revival of the economy and drop in consumer spending (67%).
Furthermore, 58% of respondents agreed that adapting the business model to industry practices and conditions within ASEAN, understanding regional regulations, payment methods and infrastructure (56%) and building relationships with suppliers and adapting supply chain logistics (56%) are the most significant challenges in the next 6-12 months.
Against the backdrop of these risks and challenges, more than half of the survey respondents consider executing digital transformation programmes (58%), driving sustainability and ESG (Environment, Social and Governance) initiatives (47%) and entering new partnerships / joint ventures to increase market presence (44%) the most important areas for their companies to focus on, so as to drive resilient and rebalanced growth in ASEAN.
To support their growth, these companies say they are seeking banking partners with strong cash management capabilities (60%), extensive trade financing services (56%), and one-stop corporate financing and capital-raising services (56%).