Thailand's stand at the Eighth China-ASEAN Expo held in Nanning, capital
of Guangxi Zhuang autonomous region, in 2011. By the end of last year, China
had invested a cumulative $13.5 billion in ASEAN, according to David Wong,
deputy chief executive at the Bank of China Hong Kong. Peng Huan / For China
Daily
Kai Arief Selomulya, head of
research and development at the National Board of Indonesian Pharmaceutical
Association in Jakarta, has never seen Chinese investors as interested in
Indonesia and neighboring countries as they are now.
Less than two weeks earlier, two
Chinese companies approached him and his association to discuss investment
opportunities in Indonesia. It was both out of interest in the domestic market
and as a gateway to the nine other members of the Association of Southeast
Asian Nations.
"We had an exhibition with
Chinese and Indian pharmaceutical companies," said Kai, whose job gives
him front-row access to the development of the industry locally and regionally.
"Many of them are interested
(in investing). There are two (Chinese) companies that are very serious about
coming in. When we talk about ASEAN, Indonesia is the country they want to be
in."
After two decades of focusing on
trade, Chinese companies are now increasingly interested in investing in ASEAN.
The turning point was in 2010, when the China-ASEAN Free Trade Agreement took
effect.
The pact created the
third-largest free trade area in the world after the European Union and the
North America Free Trade Area - Canada, the United States and Mexico. Its
emergence prompted China's Vice-Minister of Commerce Gao Hucheng to note that
"investment between both sides has entered a stage of more rapid
expansion".
ASEAN comprises Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam - 10 countries with 584 million people and a combined GDP of about $6
trillion in 2010, about the same as China's but with half the population.
"Relative to trade,
investment has been relatively low," said Frederick Gibson, an associate
economist at Moody's Analytics who focuses on the region. "But the
agreement in 2010 paved the way (for growth)."
A number of initiatives are facilitating
mutual investment in China and ASEAN countries.
The China Council for the
Promotion of International Trade has an information platform on investment in
ASEAN countries, including awards. The ninth edition of the China-ASEAN Expo,
an annual event, will be held in Nanning, capital of South China's Guangxi
Zhuang autonomous region, in September, highlighting the growing investment
links between the two.
By the end of 2010, more than
1,000 Chinese companies had invested about $2.9 billion in Indonesia, a jump of
31.7 percent from 2009. Chinese companies are also looking for acquisitions and
joint ventures in sectors such as oil, gas and coal.
Chinese telecommunications giant
Huawei Technologies Co Ltd first started setting up subsidiaries and branches
in ASEAN countries in 1999. By 2005, it was controlling about 20 percent of the
mobile network market. In 2011, the company announced plans to lay underwater
cables between Malaysia and Indonesia to provide more communication bandwidth.
It has been particularly
successful in Indonesia, though, according to Huawei Indonesia Deputy Director
Dani K. Ristandi, it wasn't easy entering the Indonesian market. Despite
initial difficulties, the company notched up a sales revenue of $1 billion in
2010.
In Malaysia, Chinese companies
are investing in high value-added petrochemical manufacturing, underlining the
push toward more qualitative investment in the region, and not just resources
extraction or cheap manufacturing. Eight Chinese companies are listed on the stock
exchange in Kuala Lumpur, the largest of them being China Stationery, which
went public last November.
Initial success
By the end of 2010, Chinese
companies had invested $250 million in Malaysia. Last year, China Huadian
Engineering formed a joint venture with Malaysian power generation company
Janakuasa to build a $1.5 billion coal-fired power plant in Vietnam. China's
ZTE Corp, another telecom giant, is building infrastructure in the country
while Aluminum Corp of China is involved in a $1 billion smelter in Malaysia's
eastern Sarawak State.
In 2008, Chinese automaker Chery
set up its eighth overseas factory in Malaysia. At its inauguration, Chery
President Yin Tongyao noted that Malaysia is the largest passenger car market
in ASEAN and also an important link to other ASEAN countries.
"We are planning to speed up
building more overseas factories in the coming two years," Yin said.
Outside Malaysia, Chery has a
factory in Indonesia and in May, announced plans to set up another with a local
partner in Vietnam, where Great Wall Motors and Chongqing Lifan already have
assembly plants.
Chinese companies are also
investing widely in Singapore. As one of the largest financial centers in the
world, Singapore has attracted more than $5 billion in investment from China
with listings from more than 150 Chinese companies.
"Singapore is an ideal
gateway for companies keen to develop clean energy solutions tailored for
Asia," said Tan Jiansheng, senior vice-president of China Guangdong
Nuclear Power Holding Co Ltd, when construction of its $33.6 million
biomass-solar power plant began there in May.
"The facility will aim to
meet the energy needs of Singapore as part of our ongoing effort to provide
clean energy," Tan said.
In Myanmar, China is responsible
for about 35 percent of all investment, about $14 billion to date. This
includes a 771-kilometer pipeline for oil and gas from Kyaukphyu in western
Myanmar to China's Yunnan province, scheduled for completion by 2013. All three
Chinese oil giants, China National Petroleum Corp, China Petrochemical Corp and
China National Offshore Oil Corp, have operations in the country.
The recent opening-up of Myanmar
is attracting a wide range of investment - from multinationals to more local
companies trying to expand their operations. In May, a trade delegation from
Liuzhou, the Guangxi Zhuang autonomous region, visited Yangon. Two Chinese
companies, construction equipment maker Liugong Group and Dongfeng Liuzhou
Motors, already have operations in Myanmar.
"We hope businesses in
Liuzhou will continue to expand their markets in ASEAN countries, build up the
city's brands and revitalize the nation's industry," Jin Honggen, an
economic and commercial counselor of the Chinese embassy in Yangon, told China
Daily.
Chinese companies are building
infrastructure in Cambodia's Stung Treng Province. Chinese hydropower,
engineering and construction company Sinohydro Corp has completed a
103-megawatt hydropower project in Kampot Province at a cost of $200 million.
In Vietnam, around 2,000 Chinese
companies have invested more than $3 billion, according to that country's
foreign ministry. Aluminum Corporation of China has invested in Vietnam's
bauxite mines while another company, Tung Fang, spent $60 million on a shoe
factory. In 2007, Tien Giang Investment and Management Company of China
launched a $100 million project to develop industrial zones.
In Laos, China CAMC Engineering
Co Ltd is involved in a joint venture to launch Vientaine New World, a major
real estate project in the capital.
Lower labor costs
In the Philippines, Cambodia and
Laos, the lower cost of labor is attracting more manufacturing facilities by
Chinese companies. This push is encouraged by the rising cost of labor in
China, the emergence of viable domestic consumer markets in ASEAN countries and
the fact that, according to Moody's Gibson, Chinese exporters have "a lot
of cash that they don't want to repatriate, so it is used for investment".
"The longer-term trend is
for investment to keep growing, especially with the geopolitical environment,"
added Gibson.
Li Yao, chief executive officer
of the China-ASEAN Investment Cooperation Fund, said it is not always easy to
structure a good deal in the region. But the fund, which has already raised the
first $1 billion of the $10 billion it will invest, is actively searching for
projects.
The private equity fund, which
will focus on investments in infrastructure, energy and natural resources in
the ASEAN region and China, comprises both Chinese and foreign funds, including
the World Bank's International Finance Corporation, which joined as a
cornerstone investor in May 2011.
"The region is punctuated by
a wide range of economic systems and different levels of economic
development," said Li. "At one end you have developed economies such
as Singapore and Brunei. At the other end of the spectrum are emerging
economies such as Myanmar, Cambodia and Laos.
"This presents a tremendous
opportunity as targeting the ASEAN region as a whole allows us to effectively
diversify our investments. We are complementary. China and (ASEAN) countries
can support each other."
The increasingly visible presence
of Chinese investors in ASEAN marks a significant change. The growth of
domestic markets in ASEAN and access to a wide range of resources is attracting
more Chinese investment, particularly as the costs of manufacturing domestically
go up.
By the end of 2011, China had
invested a cumulative $13.5 billion in ASEAN. Its direct investment in ASEAN
grew by almost 50 percent between 2002 and 2010, David Wong, deputy chief
executive at the Bank of China Hong Kong, said at the Asian Financial Forum
last December.
China is now the region's largest
trading partner, buying and selling a wide range of goods and services.
Nevertheless, the growth of
China's investments in ASEAN is slow and low, less than 5 percent of the $322
billion it has invested in other overseas destinations. In 2010, for instance,
Chinese investment in ASEAN grew 12 percent, compared with 81 percent growth in
the United States, 57 percent in Europe and 59 percent in Africa, according to
the Ministry of Commerce.
Speaking at the Eighth
China-ASEAN Expo late last year, Vice-Minister of Commerce Gao said bilateral
investment between China and ASEAN had hit the $90 billion mark and growth was
increasing after the establishment of the free trade area between China and ASEAN.
Significantly, Gao added that
China plans to build economic and trade cooperation zones in all ASEAN
countries, zones that could act as a platform for Chinese investment in the
region.
Alfred Romann
China Daily
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com
No comments:
Post a Comment