Arya News - A report released by Singapore-based bank UOB showed that 80 percent of the 380 surveyed Chinese companies plan to undertake overseas expansion in the next three years, with ASEAN continuing to be the first destination of choice.
SHANGHAI – While Chinese companies still have ambitious plans to expand their overseas business activity, structural changes are taking shape, including motives for outbound reaches and the diversification of companies and industries going abroad, said a report released by Singapore-based bank UOB.
Released for the seventh consecutive year, the latest report showed that 80 percent of the 380 surveyed Chinese companies plan to undertake overseas expansion plans in the next three years, with the Association of Southeast Asian Nations continuing to serve as the first destination of choice.
This is in line with the close trade ties between the two economies, as China’s trade value with ASEAN surged 18.2 percent year-on-year to 4.34 trillion yuan ($643.2 billion) in the first six months, said the General Administration of Customs.
Malaysia has gained the most attention so far this year, with 56 percent of polled Chinese firms expressing interest in the market. This could be partly due to the energy crisis that has roiled the world this year. The richer application scenarios in Malaysia can be translated into more opportunities for Chinese companies, especially new energy companies, said Xin Tao, managing director of UOB China.
While Malaysia has announced plans to completely transition away from coal by 2044, electricity consumption by data centers is projected to surge from 7 percent of total demand in 2026 to 31 percent by 2035 in Peninsular Malaysia, said local energy authorities. Procurement of renewable energy and acceleration of the country’s solar projects are just some of the strategies being used to address the surging demand.
At present, Chinese telecommunication companies have the strongest presence in Malaysia, including electronics manufacturing, electronic components and server suppliers related to artificial intelligence, said Xin.
Singapore came in second place this year, with 54 percent of polled Chinese enterprises expressing interest in further tapping into the market, 10 percentage points higher than last year.
Xin said tech firms usually locate their regional headquarters or research and development centers in Singapore thanks to its rich talent supply. But their operational facilities are usually based in Malaysia where land costs are much lower. The lower marginal costs mean higher efficiency in expansion, she said.
Up to 51 percent of the polled Chinese firms showed interest in Thailand this year, up 12 percentage points from a year earlier.
Chinese retailers usually make Thailand their first ASEAN gateway as it possesses a large number of Southeast Asian retailing brands for beer, soft drinks, coffee, energy drinks and snacks, said Xin.
Thailand is often the first stop for Chinese new energy vehicle makers to tap Southeast Asian markets as they inject more capital to build local factories, and entire supply chains have gradually moved to Thailand, including providers of batteries, motors, electronic controls, seat belts and glass, she added.
This reflects the diversification of Chinese companies’ outbound reaches. Instead of bringing products to new markets, they are now introducing technologies, skills, operational capabilities, intellectual property rights and even entire industrial chains. It can be said that Chinese companies have moved beyond standalone overseas investments to a full-ecosystem approach to global expansion, said Adaline Zheng, CEO of UOB China Ltd.
The sectoral scope of Chinese overseas expansion has widened to include high-end manufacturing, new energy, electric vehicles and healthcare. A shift has also occurred regarding the player mix, from large well-capitalized giants to smaller private firms and asset-light businesses like AI startups, Zheng said.
It should be noted that the call for the internationalization of the yuan has risen as Chinese firms become more active in overseas markets, which is evidenced by the growing volume of yuan-denominated bank loans, bonds and other financing instruments. With the deepening cooperation between Chinese and ASEAN companies and the widened application scenarios, the renminbi is no longer just a transactional tool but increasingly viewed as a hedging instrument thanks to its stability, said Zheng.