Chinese sees strong economic expansion and global demand with ASEAN partnerships

Chinese and ASEAN companies continue to show enthusiasm for both inbound and outbound investment, according to the latest research report released by the United Overseas Bank.

The report surveyed nearly 600 large-scale Chinese companies, with decision-makers or senior executives providing their economic outlook for 2023, and their main considerations for future development.

It found that more than 90 percent of the surveyed companies have strong demand for overseas expansion, with the main driving force being to increase profitability and revenue, and enhance international reputation.

Respondents said they would implement a series of plans to drive business growth, including digitizing operations, diversifying supply chains, expanding new customer groups, and improving employee skills or reducing costs.

In addition, more than 40 percent of the surveyed companies plan to expand into Southeast Asia in the next three years, with Singapore, Thailand, and Malaysia being the top three investment destinations.

Meanwhile, 40 percent of the surveyed enterprises in the ASEAN region hope to expand their business on Chinese mainland, including 46 percent of wholesale trade enterprises and 45 percent of manufacturing and engineering enterprises. Enterprises from Thailand (52 percent) and Singapore (46 percent) have the strongest willingness to invest in the mainland market.

The Regional Comprehensive Economic Partnership (RCEP) agreement, effective in 2022, has injected new vitality into cross-border trade and further deepened mutually beneficial cooperation between China and ASEAN. In the first four months of 2023, ASEAN continued to be China's largest trading partner, with bilateral trade increasing by 13.9 percent year on year, accounting for 15.7 percent of China's total foreign trade value.

With the official implementation of RCEP, China and ASEAN have further strengthened their trade and industrial chain cooperation, and the heat of investment between the two sides continues to rise, said Adaline Zheng, alternate CEO and head of Wholesale Banking at United Overseas Bank (China).

Despite a positive outlook for future development, businesses still face two major challenges, namely global high inflation and the need for diversified supply chains, the report pointed out.

While most surveyed companies expect that high inflation will ease in the next six months to two years, nearly 90 percent of Chinese companies surveyed are still feeling the impact of high inflation, with more than half experiencing increased operational and raw material costs. The main challenges faced by companies building diversified supply chains are procurement difficulties, rising supply costs, and just-in-case inventory requirements.

However, businesses are actively responding by establishing stronger supplier relationships, digitizing supply chain management, and pre-stocking raw materials to ensure supply chain stability.

As the Chinese economy moves towards high-quality and sustainable development, companies are also placing greater importance on sustainable transformation.

The report indicates that almost all surveyed companies consider sustainable development to be important or essential, but only half have implemented sustainable development measures. One of the main obstacles to implementing sustainable development measures is access to sustainable financing.

"Currently, the real economy is progressing with great determination and facing many challenges such as reducing costs, increasing efficiency, expanding financing channels, and stabilizing the supply chain," Zheng said.

The bank has been publishing this annual report in Singapore since 2020. This year, the report was expanded to the bank's seven major markets, with over 4,000 large, medium, and small enterprises participating in the survey.