China’s Asean fund flows keep surging

business June 20, 2017 01:00

By THE STRAITS TIMES
ASIA NEWS NETWORK
SINGAPORE

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CHINA is pouring record levels of investment into its Belt and Road Initiative (BRI) – which calls for massive development of trade routes – and Asean is emerging as a major beneficiary.



A report by Maybank Kim Eng noted that China’s non-financial direct investment into Belt and Road countries rose to US$14.5 billion (Bt492 billion) last year from $12.5 billion in 2014, based on official data.

Chinese President Xi Jinping announced his ambitious One Belt, One Road vision in September 2013, and the programme has since become his signature foreign-policy initiative.

In May, he pledged an additional $124 billion to the initiative, on top of an estimated $900 billion already made available.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye found that China’s M&A (merger and acquisition) as well as greenfield investments into Asean surged after the initiative was announced.

Asean was the greatest beneficiary of Chinese greenfield investments from 2003 to 2015, with Indonesia, Malaysia and Vietnam gaining in particular, Chua and Lee noted in their report.

Most of the investment into the region was concentrated in manufacturing, followed by primary industries such as electricity, construction and mining.

Asean has also been a major source of merger and acquisition deals for Chinese companies.

The region accounted for about 30 per cent of total M&A investments in Belt and Road countries from 2005 to last year, with the largest recipients being Singapore, Malaysia, Indonesia and Thailand.

The information-technology communications sector in particular has been attracting more Chinese investments in recent years, the report noted. Alibaba’s purchase of Singapore-based e-commerce player Lazada is one example.

Other deals that could be in the works include JD.com’s investment in Indonesian online marketplace Tokopedia and Tencent’s investment in Indonesian ride-hailing service Go-Jek.

China’s BRI and associated infrastructure investments are expected to ramp up growth and improve livelihoods across the region, but there are also challenges, Chua and Lee pointed out.

There are already reports of numerous failed projects. According to the China Global Investment Tracker, more than $250 billion of China’s overseas investments failed between 2010 and 2015.

In Asean, notable examples of failed ventures include Myanmar’s Myitsone Dam Project, halted because of public pressure arising from environmental concerns, and Midea Group’s withdrawal from Vietnam after protests relating to the South China Sea.