What do Chinese businesses need to do to invest successfully in Southeast Asia?

Chinese companies are investing heavily in Southeast Asia, one of the most attractive destinations for overseas expansion. However, Chinese financial experts advise them to avoid a massive influx into the Association of Southeast Asian Nations (ASEAN) market by offering homogeneous products and services, as this could lead to fierce competition.

Electric vehicle manufacturer BYD opened a production plant in Rayong, Thailand, in July 2024. (Photo: Reuters)

At the recent annual Financial Street Forum meeting, Lin Jingzhen, CEO and Executive Vice President of Bank of China, stated that the operations of internationally competitive Chinese companies in the green energy and infrastructure construction sectors in Southeast Asia have put significant pressure on local companies.

"This is an issue we need to pay special attention to because it will also hinder the development of Chinese-funded businesses in the region ," said Lin.

Faced with an increasingly saturated domestic market and rising trade barriers from Western countries targeting "Made in China" products, deploying operations and building factories overseas has become the only path to growth for many Chinese businesses.

Thanks to advantages such as low tariffs, cheap labor costs, geographical proximity, and cultural similarities, Southeast Asia is becoming a top choice for Chinese businesses looking to expand overseas and a key destination for industrial transfers from China.

Also at the meeting, Chairman of China Galaxy Securities, Mr. Wang Sheng, stated that the supply chains of China and ASEAN are the result of mutual support, and that Chinese investment in the region has surpassed investment in Europe and the United States.

Mr. Wang stated that from January to July 2024, China's direct investment in ASEAN member countries increased by 15% year-on-year.

Lin Jingzhen suggested that agencies such as the National Development and Reform Commission—China's top economic planning body—and the Ministry of Commerce should cooperate with industry associations in the overall planning process for Chinese companies' investments in Southeast Asia, with the aim of avoiding monopolies, uniform competition, and excessive resource waste.

China has been ASEAN's largest trading partner for the past 15 years, and ASEAN has been China's largest trading partner since 2020.

Following a meeting in Vientiane, Laos, on the sidelines of the ASEAN regional forum in October 2024, both sides announced that negotiations on Version 3.0 of the China-ASEAN Free Trade Area (FTA) had achieved “basic results” and that they were working towards signing a revised agreement next year.

Source: https://congthuong.vn/doanh-nghiep-trung-quoc-can-lam-gi-de-dau-tu-thanh-cong-o-dong-nam-a-354072.html