China Eyes SE Asia Investments

Companies from the world’s second-biggest economy are increasingly targeting the region for investment, especially into infrastructure. That’s a potential boon for developing economies, which need a massive upgrade of roads, rail, and ports if they are to meet their economic potential. It also comes amid a wider crackdown by regulators in Beijing on outbound investment.

The Asian Development Bank estimates that emerging economies across Asia will need to invest as much as $26 trillion on building everything from transport networks to clean water through 2030 to maintain growth, eradicate poverty, and offset climate change, Bloomberg reported.

That’s where China comes in. Although the share of Chinese foreign direct investment into the Association of Southeast Asian Nations remains relatively small at 6.8% of total net inflows in 2015, Chinese corporations are taking up larger stakes in major infrastructure projects across the region, according to Weiwen Ng, economist at Australia & New Zealand Banking Group in Singapore.

China accounted for 14% of net FDI inflows into Thailand last year, 8% in Vietnam and Indonesia, and 6% in Malaysia, according to ANZ. The Philippines received a marginal share of 0.14%.

By sector, the bulk of Chinese investments has gone into energy, transport, and real estate, ANZ noted. The three sectors accounted for 78% of China’s cumulative investment and construction contracts in ASEAN from 2005 to the first half of 2017.

For China, the opportunities are significant. The 10 ASEAN members boast some of the world’s fastest-expanding economies, such as the Philippines and Vietnam, with growth rates of more than 6%. With a combined population of more than 620 million and an economy of $2.6 trillion in the region, the investment potential is huge. By 2020, the region will have the world’s fifth-largest economy, the World Economic Forum predicts.