Is south-east Asia the next destination for outbound investment?
March 29, 2012 | BY
clpstaff &clp articles &Ma Mingqiang, secretary-general of the ASEAN-China Centre, has urged Chinese enterprises to go to ASEAN countries for their outbound investment. But it is not clear whether government support will be enough to spark an investment boom in the region
Ma was quoted in the People's Daily that ASEAN countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) offer attractive investments opportunities for Chinese enterprises that want to expand internationally. Most ASEAN countries are emerging markets with rapid economic growth, great natural and labour resources and are geographically close to the mainland.
Alex Zhang, head of White & Case's M&A practice and based in Shanghai noted there has only been a small increase in outbound investments to ASEAN countries. “The volume is increasing and it is a positive sign for investment in the region,” he said. He also noted that: “there are a lot more interesting projects and opportunities in ASEAN countries,” adding that infrastructure and mining projects remain an interesting area for Chinese companies in these countries.
The Chinese government offers strong support for outbound investment in ASEAN nations. The $10 billion China-ASEAN Investment Cooperation Fund and substantial loans for infrastructure projects help entice potential investors.
There is no special legal treatment for investment in ASEAN nations, but one of the barriers for outbound investment is government approval. “I don't see any special treatment in terms of dealing with the regulations, but the government might approve investments easier,” said Zhang. He added that an increasing approval rate encourages future investments.
ASEAN countries are risky for investors. Some nations are full of uncertainties, as market mechanisms are not fully developed. It is hoped the loans from the Chinese government for infrastructure will reduce some of these concerns, making them a more attractive destination for outbound investment. Zhang also considered the Chinese population living abroad in these countries, which can make investments easier.
Government support will definitely entice potential investors into ASEAN nations. However, it is important to consider the political context. The Chinese government wants to expand its influence within the region and such investments aid this expansion. Investors need to look beyond the government incentives and ensure the investment is right for them.
Over the past few years, Chinese outbound investment has risen sharply. While most of this investment has gone to non-ASEAN countries, specifically Australia, Africa, North and South America, Chinese investors may be looking for something closer to home. ASEAN nations can provide this proximity and exciting opportunities.
By David Tring
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