The Asian connection: China's path to sustainable growth

Consider the ASEAN region, a collective of ten Southeast Asian countries brimming with untapped potential.

For decades, the narrative of Chinese outbound investment (ODI) has been a tale of Western allure. The bright lights of Wall Street, the innovation of Silicon Valley, and the established markets of Europe have long captivated Chinese companies, driving their global expansion.

But the landscape is shifting, and a new, more compelling story is emerging: the future of Chinese investment is not in the distant shores of the West, but in the vibrant, dynamic, and rapidly evolving economies of Asia. This is where the true potential for growth and prosperity lies, and where Chinese companies can write a new chapter in their global journey.

The ASEAN surge: A new economic horizon
Consider the Association of Southeast Asian Nations (ASEAN) region, a collective of ten Southeast Asian countries brimming with untapped potential.

From 2014 to 2023, China’s total import and export trade volume grew at a compound annual growth rate (CAGR) of 3.6%, whilst ODI grew at a CAGR of 4.1%. In 2023, China’s ODI flows to ASEAN surged by 34.7% year-over-year, a clear signal that Chinese businesses and financial institutions are recognising the opportunities that ASEAN presents.

The top three ASEAN countries for ODI flows are Singapore, Indonesia, and Vietnam, each offering unique strengths and advantages.

Building bridges: The power of local partnerships
To truly capitalise on this opportunity, Chinese companies and financial institutions need to adopt a new approach that prioritises strategic partnerships with local players. Navigating the complexities of each Asian market requires a deep understanding of local cultures, business practices, and regulatory environments.

Attempting to impose a one-size-fits-all approach is a recipe for failure. Our research suggests that “strengthening cooperation with local and regional banks abroad is crucial. Choose banks that align with your customer base, region, and industry.”

Local banks possess invaluable knowledge of the local market, established networks, and strong relationships with local businesses. Partnering with these institutions can provide Chinese companies with a crucial competitive edge, allowing them to navigate the local landscape with greater ease and effectiveness.

The digital revolution: Fintech and e-commerce in Asia
The rise of fintech and e-commerce in Asia presents another significant opportunity for Chinese investors. Many Asian countries are leapfrogging traditional banking infrastructure and embracing mobile payment systems and other digital financial solutions at an astonishing rate.

Chinese companies, with their expertise in these areas, are uniquely positioned to provide innovative financial services tailored to the needs of Asian consumers and businesses. Over the past five years, China’s cross-border e-commerce import and export scale has reached $356b (RMB 2.6t), with an annual growth rate of 13%, and over 60% of cross-border e-commerce customers are small and micro-enterprises.

This highlights the crucial role of fintech in supporting cross-border trade, particularly for small and medium-sized enterprises. By leveraging fintech solutions, Chinese companies can unlock significant growth opportunities and facilitate greater economic integration within Asia.

Beyond economics: Geopolitical and cultural synergies
But the benefits of this shift towards Asian investment extend far beyond mere economic gains. By strengthening economic ties with its neighbors, China is fostering greater regional stability and promoting a more balanced and equitable global landscape.

Diversifying investment destinations within Asia also reduces reliance on any single market and spreads risk across a broader portfolio.

Chinese companies can leverage the diverse strengths and specialisations of different Asian economies, creating a more resilient and adaptable investment strategy. For example, Malaysia might be a good place to develop advanced microchips, whilst the Philippines could become an important hub for call centre and customer service operations.

Furthermore, the cultural alignment between China and many other Asian countries can facilitate smoother integration and stronger long-term relationships. Whilst Western markets often require significant cultural adjustments, operating within Asia often feels more natural and intuitive for Chinese businesses. This can lead to greater understanding, stronger partnerships, and ultimately, more sustainable success.

Navigating the challenges: A path to sustainable growth
However, let’s be frank: this transition won’t be without its challenges. Successfully navigating the Asian investment landscape requires a nuanced understanding of local regulations, cultural sensitivities, and political dynamics. Chinese companies must be prepared to adapt their strategies, invest in local talent, and build genuine, long-term relationships with their Asian counterparts.

Strategic pathways: A blueprint for Asian success
To thrive in the dynamic Asian market, Chinese companies and financial institutions must be bold and strategic. Here’s a concise and impactful plan:

1. Know your customers: Identify and understand the key customer segments in Asia. Assess their needs and the market opportunity. Analyse how competitors are serving these customers and find ways to offer superior value. This deep insight will be your compass in navigating the diverse Asian markets.
2. Leverage your strengths: Evaluate your current international business capabilities and pinpoint your strengths. Determine which product capabilities need development and whether to focus on cross-border or overseas business. Set clear, ambitious goals for short-term, medium-term, and long-term international expansion.
3. Differentiate with precision: Structure your domestic organisation and team to support international growth. Decide whether to build capabilities in-house or through strategic partnerships. Identify the next steps and regions for expansion, ensuring each move aligns with your strategic vision. This will create a unique competitive edge.

In the future, commercial banks will be more than just financial service providers; they will be the bridges and links for Chinese enterprises to the world.

By systematically building the three pillars of “key customer segments, key regions, and key products,” and supported by robust organisational and collaborative systems, commercial banks can seize the opportunities in the new wave of corporate globalisation. This strategic approach will enable them to capture international financial opportunities and develop unique business competitiveness.

The future is Asia
But the potential rewards are immense. By embracing this shift towards Asian investment, Chinese companies can unlock unprecedented growth opportunities, strengthen regional ties, and contribute to the creation of a more prosperous and interconnected Asian economic ecosystem.

Moreover, the shift towards Asia as a primary investment destination also presents a unique opportunity for China to reposition itself as a leader in sustainable development and responsible investment.

As Chinese companies invest in infrastructure projects, renewable energy initiatives, and environmental conservation efforts across Asia, they can demonstrate a commitment to creating a more sustainable and equitable future for the region. This can enhance China's reputation as a responsible global citizen and further strengthen its relationships with its Asian neighbors.

Ultimately, the future of Chinese outbound investment lies within Asia. It’s time to embrace the potential of this dynamic and rapidly growing region. By forging stronger ties, building strategic partnerships, and leveraging innovative technologies, Chinese companies and financial institutions can play a pivotal role in shaping the future of Asia and creating a more prosperous and interconnected world.

The time to act is now. The future is Asia.