By Xu Ningning
According to the latest statistics from Chinese customs, the bilateral trade volume between China and the U.S. was still larger than that between China and ASEAN in November 2018, but by May 2019, the China-ASEAN trade volume had grown larger than the China-U.S. trade volume. ASEAN has overtaken the U.S. as China’s second-largest trading partner.
Potential of China-ASEAN Trade
The leaders and governments of China, ASEAN and its member states have repeatedly made clear their opposition to trade protectionism and unilateralism in the world economy today. They believe that the two sides should further tap the potential for trade by actively upgrading the ASEAN-China Free Trade Area (ACFTA), continuously expanding the scale of trade, accelerating the flow of various production factors in the region, promoting rational industrial layout in the region, optimizing the regional supply chain and value chain, and promoting regional industrial structure upgrading.
The two sides should improve policies and introduce measures conducive to trade facilitation, strengthen the connectivity of infrastructure such as highways, railways, waterways and communication, continue to promote regional transport facilitation and standardization, create more favorable terms of trade for enterprises, promote investment through trade, and boost industrial vitality through trade.
China and ASEAN should actively cooperate to promote the conclusion of RCEP (Regional Comprehensive Economic Partnership) talks by the end of 2019. In the process of RCEP negotiations, chambers of commerce and business associations in RCEP member countries should be encouraged to interact and exchange information to lay a foundation for promotion and cooperation rather than obstruction in economic and trade interaction.
Rapid Growth of Chinese Investment in ASEAN
Chinese enterprises have increased their investment in ASEAN for several reasons:
First, the relocation of industries conforms to the law of economic development. Some ASEAN countries have attracted investors with their low labor costs, abundant natural resources, large industrial growth space, great industrial development potential and preferential investment policies. Second, thanks to reform and opening-up, an increasing number of Chinese enterprises are prepared to “go global.”
Third, China-ASEAN relations are friendly, and joint construction of the Belt and Road has created business opportunities for bilateral cooperation. In the Belt and Road Big Data Report 2018 released by China National Information Center, five ASEAN countries are listed in the top 10 of the cooperation index.
Fourth, transportation between China and ASEAN countries is convenient. Every week, more than 3,800 flights shuttle between Chinese and ASEAN cities.
Fifth, ASEAN economies continue to grow and their political situations remain stable. With the goal of building the ASEAN Economic Community (AEC), and the support and cooperation of major international players, ASEAN is striving to become the world’s fourth largest economy by 2030. This year’s ASEAN Leaders’ Meeting set for late June is expected to adopt a statement on “Advancing Partnership for Sustainability” (theme of the leaders’ meeting) to drive concrete deliverables for ASEAN Community building.
Partners for Entrepreneurship and Innovation
Over the past nearly 30 years, I have maintained close contact and communication with the business communities of ASEAN. Taking into consideration the experience and lessons of Chinese investment in ASEAN in recent years, I have some advice for the Chinese businesses looking to invest in ASEAN:
1.Be open, innovative and flexible to cope with the fluid situation in ASEAN markets. To adapt to the economic situation of the region and the world, it is important to adjust a market development strategy in time and open new development space. Before investing in ASEAN countries, companies should conduct adequate market research and carefully research the latest policy changes, select the right local partners, and control investment risks.
2.Because ASEAN countries have different national conditions, Chinese investors should consider a series of factors including the host country’s industrial structure and policy, tax policy, financial policy, land policy, employment policy, labor remuneration level, labor quality, factory rent costs, infrastructure conditions, market capacity and more. They should also find out if the host country is enjoying trade preferential policy with certain developed countries as well as its FTA relations with other countries, its relations with China and its public opinion of China.
3.Abide by local industry regulations and establish a sound reputation for quality and service. First, Chinese investors should adopt “good faith” as a code of conduct and attach great importance to quality. Second, efforts should be made to dispatch Chinese labor personnel abroad in strict accordance with regulations and requirements, provide extensive job training and shape a good image for Chinese enterprises. Third, Chinese companies operating abroad should follow relevant laws, rules and regulations.
4.Facing new changes in the international business environment, it is essential for Chinese investors to improve in terms of international cooperation. First, they should not simply copy the business model and experience of China, but instead adapt the business to the local national conditions and market. Second, they should cultivate and employ as many local employees as possible to foster the transformation from “an overseas company” to “a local company.” Companies should purchase raw materials from the local market and make products to meet the needs of the local market to benefit local economic development. Third, “Do as the Romans do” means visitors should place equal attention on economic benefit and social benefit by properly handling relations with the local stakeholders such as government, residents, employees, trade unions and the media. Visitors should improve local residents’ comfort with words and deeds.
5.Stay in touch with local Chinese business associations. Thanks to advantages in business connections, experience, information, and other areas, local business associations can provide assistance and guidance for new investors to settle in industrial parks already built in ASEAN countries. Industrial parks can provide “one-stop and one-package services” to new investors, which can make up for the lack of experience in international cooperation plaguing some enterprises.
More than 50 national business associations can be counted among the Chinese members of the China-ASEAN Business Council (CABC). Over the last month or so, CABC has organized an investigation tour of Chinese business associations with these findings: First, most business associations have advantages and enthusiasm for helping Chinese enterprises to “go global,” and some associations have even formulated international cooperation plans. Second, associations have carried out various exchange and cooperation programs with their ASEAN counterparts. However, if such exchange and cooperation were not in-depth, it would be difficult for the associations to provide guidance and services for Chinese enterprises in ASEAN countries.
The international business environment today is complicated and volatile. Chinese investors in ASEAN will inevitably encounter issues. They should cope with the changing situation alongside partners and improve international competitiveness.