PUBLISHED : 19 Oct 2024 at 22:18
BEIJING – Chinese companies venturing into Southeast Asia, one of the hottest destinations for overseas expansion, should refrain from flooding the market with homogeneous products and services that would lead to vicious competition, a senior Chinese bank executive has urged.
Internationally competitive Chinese companies’ Southeast Asian operations in the green energy and infrastructure construction sectors had subjected local companies to a great deal of pressure, said Lin Jingzhen, Bank of China’s executive director and executive vice-president.
Lin made the comments at the annual meeting of the Financial Street Forum on Friday, warning about potential consequences from host countries.
“This is something we need to attach great attention to, as it will also seriously hinder the development of Chinese-funded enterprises in the area,” Lin said according to a copy of his speech obtained by the Post.
Facing an increasingly saturated domestic market and rising trade barriers from Western countries targeting “Made-in-China” products, launching operations and building factories overseas have become the only path to growth for many Chinese companies.
Thanks to lower tariffs, cheap land and labour, preferential tax policies, cultural similarities and geographic proximity, Southeast Asian has become the first choice among Chinese companies looking to expand overseas and has been the primary destination for industrial transfers from China.
Supply chains of China and the Association of Southeast Asian Nations (Asean) were “complementary”, China Galaxy Securities chairman Wang Sheng told the same session, adding that China’s investment in the region has exceeded that in Europe and the United States.
Electric vehicle (EV) maker Build Your Dreams (BYD) is among the Chinese companies expanding into Southeast Asia. It opened this factory in Rayong, Thailand, in July 2024. (Photo: Reuters)
From January to July, China’s direct investment in Asean members increased by 15% year-on-year, he said.
But the hyper-competitive mindset of Chinese business executives operating in foreign countries has long been a source of resentment among local communities.
Lin from Bank of China suggested that authorities such the National Development and Reform Commission – China’s top economic planner – and the Ministry of Commerce work with industrial associations in the overall planning of Chinese companies’ investment in Southeast Asia, with the aim of avoiding the creation of oligopolies, homogeneous competition and excessive waste of resources.
China has been Asean’s largest trading partner for the past 15 years, and Asean has been China’s biggest trading partner since 2020.
After a meeting in the Laotian capital Vientiane this month, both sides announced that negotiations on Version 3.0 of the China-Asean Free Trade Area (FTA) had reached “substantial conclusion”, and they were working towards signing the revised agreement next year.
