China's economic engagement

In recent years, with the gradual maturation of the Chinese economy and the cost advantages of other Asian countries, more and more Chinese companies are turning their attention to the rest of Asia.

Among the motivations, of course, include government incentives - say, China Mobile's $ 500 million investment in 3 / 4G operating licenses in Pakistan - but mostly for purely business reasons. The domestic market is gradually maturing, competition is aggravating and costs are rising day by day. Chinese companies are growing in size and growing in capacity, making Asian markets more attractive to them - where market prices are higher than domestically and competition is less intense domestically.

In addition, the service experience accumulated by Chinese enterprises embodies the process of China's transition from a low-income country to a middle-income country, and these service experiences are also applicable to many Asian markets.

China's economic engagement in Asia is also undergoing a shift from one era to another, from investing in a more diversified business model focusing primarily on trade volume, import and export, and state-led investment in basic materials. These include:

- China's shift from a sole export business to the establishment of marketing, operations, manufacturing and research and development functions in the local market

- Investment focus of China's basic materials and infrastructure shifted from Africa to Asia

- Chinese companies and individuals began to shift their investment to Asian real estate

- Investing in the entire agricultural chain of Asia for China's consumption

- The rise of China as a "digital" leader and its impact on Asian markets

Corresponding we also see:

 Whether it is business travel, sightseeing or studying abroad, the population moving to other Asian countries is also changing.

Not only for export

In the import and export business, the interdependence between China and many Asian countries is obvious to all. 35% of Australia's exports, 26% of South Korea's exports and 20% of Japan's export destinations are China. For most Asian countries, China accounts for 15-20% of their current total imports. Therefore, there is a trade deficit between China and many Asian countries, but this situation will most likely change in the coming years.

First of all, as an integrator, China needs to import large quantities of electronic components from other Asian countries. Afterwards, it is assembled and integrated in China and re-exported to Europe and the United States. As China begins to independently produce these components, mainly for a series of products such as semiconductors and LCD screens, the import volume will be substantially reduced. Second, compared to the past, China exported no brand of low-cost products. Now Chinese companies are beginning to build their own brands in the Asian market and export medium-grade branded goods.

In the future, we may see that China is gradually transforming itself from a factory in the world to manufacturing only in neighboring markets of China and Asia, thus enabling more efficient cost-utilization.

We find that some companies have started to shift their manufacturing centers from China, especially some Asian companies.

In recent years, Taiwan, South Korea and Japan have begun to focus on Vietnam and Bangladesh. But these trends are more transient at the moment. Western multinationals are more concerned with the diversification of production than with the transfer of China's manufacturing center to other Asian countries. India and Indonesia are beginning to reach economies of scale, so local production is more in line with local conditions.

At present, it is not surprising that no Chinese company has shifted its manufacturing focus from China. Lenovo's Pondicherry factory more is a special case. Special cases include SAIC and the Great Wall. Their factories in Thailand are designed to enter the local automobile cluster and enter the ASEAN market. Of course, there are also special cases of Malaysia's Comtec Solar Energy Company.

As private-sector companies in China see the cost and flexibility advantages of other Asian markets, they are also worried about their ability to manage international business, although they are also beginning to expand their production in these countries. The few examples of Chinese companies establishing R & D centers in Asian countries outside of China are Huawei's large R & D center in Bangalore and IBM's R & D center in Japan acquired in 2005.

However, it has become the norm for Chinese enterprises to set up customer-oriented marketing functions in the global market. Chinese companies are no less powerful than their multinational counterparts in customer segmentation and customer insight. The marketization that Xiaomi made before selling mobile phones in Singapore, Haier's initial purchase of customers in Indonesia and Lenovo's sales of PCs in India are proof of Chinese companies' ability to mature marketing and customer segmentation.

So next, where will the investment in China's manufacturing industry go?

India is a good investment target, both in terms of market size and product demand, in line with China's investment needs. Japanese and Korean companies have begun large-scale investments in India, and Chinese companies are lagging behind in this area. For example, Japan's outward direct investment in India has exceeded 16 billion U.S. dollars, while China's outward direct investment has only 400 million U.S. dollars.

And of course Indonesia, which is particularly attractive as a burgeoning consumer market. Likewise, Pakistan will also attract more Chinese companies to join in the coming years.

Basic Materials and Energy

On basic materials and energy, China will continue to look for more energy suppliers that are nearing home. Central and East-East Russia has become very important exporters of natural gas. China has also invested heavily in building the infrastructure needed to transport natural gas to China.

Putin's visit to China in May this year marked the fact that China has procured energy from neighboring countries as a major national policy. During his stay in China, Putin signed a contract of energy supply worth as much as 400 billion U.S. dollars.

Indonesia, including Australia, has also gradually become a more important exporter of coal and mineral resources. CICC recently invested 1 billion U.S. dollars to build the infrastructure needed to export mineral resources from resource-rich countries to China.

In most cases, Chinese companies hold a minority stake. Because they borrowed from their investment experience in Africa, they found that often acquiring the majority of shares was not a prerequisite for success and sometimes even a disadvantage. Gradually, these state-owned enterprises began to favor investing more in Asia than in Africa because the situation in Asia is closer to China.

In the coming years, China may also become the largest exporter of energy technologies in Asia. Chinese nuclear companies are looking for opportunities to sell nuclear power plants in Asia. China has a lot of solar photovoltaic capacity, but also a leading wind power.Other Asian countries are beginning to gradually increase their investment in solar power and wind power so they will buy the products they want from China. For example, the new Indian government has already invested billions of dollars in solar power and is turning to China for the resources it needs.

agriculture

Agricultural investment in Asia to meet China's growing food needs has long been the direction of investors in large companies and private equity firms, but investment in agriculture is still in its infancy. In the next 10 years, China's import demand for certain products will exceed the current global cross-border trade volume of such products.

New Zealand's export growth to China has reached 35% annually, mainly milk. The volume of beef imported from India is also on the rise, as is Thai rice, Russian wheat, and marine fish from Indonesia and Malaysia.

Future growth will be driven primarily by several factors - the growing domestic demand for high-protein products and high-quality foods, the loss of land, and the relatively high returns abroad.

At present, most of China's food imports come from Asian countries. The supply of neighboring countries is seen as a safer choice.