Borderless Business: China-ASEAN Corridor

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Borderless Business:China-ASEAN CorridorOpening doors to diverse opportunities

Contents:Overview of the China-ASEAN Corridor:Opening New Doors for Chinese Businesses3Our Growth Watchlist: Three Sectors Drivingthe Future of the China-ASEAN Corridor8Acting with Impact: Five Focus Areas for ChineseCompanies to Drive Resilient Growth in ASEAN18

Overview of theChina-ASEAN Corridor:Opening New Doors forChinese Businesses

Overview of the China-ASEAN CorridorASEAN presents a major growth opportunityfor Chinese companies looking to internationalise. The region’s fast-growing consumermarkets, rapidly maturing supplier landscape,and regional trade links offer Chinese companies strong growth potential in sectors such ashigh-value manufacturing, energy, and digitalservices. ‘Borderless Business: China-ASEANCorridor’ is a strategic point-of-view commissioned by Standard Chartered and prepared byPwC, looking at high potential opportunities forcross-border growth and showcasing keyareas of focus for Chinese companies to succeed in the ASEAN region. In addition, this report also includes insights collated via a surveyof senior-level executives from Chinese companies that are currently engaged in cross-borderactivities across the China-ASEAN corridor.Economic linkages betweenChina and ASEAN to deepenthrough trade and investment(ASEAN), an emerging economic powerhouseas the fifth largest economy in the world by GDP( USD 3 trillion), offers significant trade andinvestment opportunities given rising consumption and improved manufacturing capabilities.Economic linkages between China and ASEANhave strengthened, accelerated by the former’smeteoric rise to the world’s second largest economy by GDP. China1 is ASEAN’s largest importpartner with merchandise imports valued atUSD324 billion in 2019, accounting for 23 percent of all imports in the region and growing ata compound annual growth rate (CAGR) of 7.5per cent from 2014-19. In 2020, Chinese exportsinto ASEAN stood at a sizeable USD315 billiondespite COVID-19-related disruptions. Foreigndirect investment (FDI) from China into ASEANhad also risen steadily from USD17.4 billion in2014 to USD20.0 billion in 2019.Maturing and more sophisticated businesses inChina are looking abroad for growth opportunities and new consumer markets. TheAssociation of Southeast Asian NationsFigure 1: Imports and FDI from China1 into ASEANSource: ASEANStats1 Trade and FDI data cover both Mainland China and Hong Kong.Borderless Business: China-ASEAN Corridor4

Overview of the China-ASEAN CorridorGoing forward, further growth is expectedacross the China-ASEAN corridor. A pulse surveyof Chinese companies2 focusing on ASEANrevealed that more than 60 per cent ofrespondents are looking to expand their sales/production in the region by over 10 per cent overthe next 12 months. There are various drivers forthis targeted growth – whether it is a growingcustomer base in ASEAN or enhanced manufacturing capabilities within the region. According to our survey, 56 per cent of respondents arefocusing on ASEAN to gain access to the largeand growing consumer market, while44 per cent are expanding to diversify theirproduction footprint3.Looking within ASEAN, Singapore andMalaysia have typically been considered ashubs for Chinese investments, providing aplatform for growth throughout the region. Thistrend is expected to continue, with over 60 percent of survey respondents from China focusingon Singapore and Malaysia for expansion.Figure 2: Key Drivers for Focus on ASEAN and Major Economies Offering ExpansionOpportunities56%Access to the large and growing ASEANconsumer market54%Local government incentives and supportfor project sustainability/ stability51%Presence of a mature and reliablesupplier base47%Access to a global market (from ASEAN),enabled by a network of FTAs44%Diversification of production footprint28%Availability of abundantand skilled workforce21%Enhanced connectivity in digitaland physical infrastructureNote: Survey questions asked: ‘What are the key drivers for your focus on ASEAN?’ and ‘Which of these major economies within ASEAN doyou think offers the best expansion (sales / production) opportunities for your company?’For Key Drivers - values indicated above refer to the % of survey respondents who included the driver as one of the top 3 ranked choicesSource: Standard Chartered Survey, 20212 Survey commissioned by Standard Chartered in April 2021 and completed by senior executives at 43 companies based in China andfocusing on the China–ASEAN corridor3 For key drivers, values refer to the % of survey respondents who included the driver as one of the top 3 ranked choicesBorderless Business: China-ASEAN Corridor5

Overview of the China-ASEAN CorridorGrowth of the China-ASEAN corridor is expected to be driven by China-led initiatives, such asthe Belt & Road Initiative (BRI) and Renminbiinternationalisation. Ratification of the Regional Comprehensive Economic Partnership (RCEP)Agreement will further support this growth,through increased collaboration and alignmentbetween China and ASEAN.The Belt & Road Initiative willfacilitate Chinese investmentinto the regionThe BRI has elevated economic cooperationand connectivity between China and ASEAN,with a cross-industry focus supporting Chinese companies’ internationalisation acrossmultiple sectors. While the BRI began with anemphasis on large-scale infrastructure projectsto improve the region’s transport and logistics network for facilitating trade with China,greater investment from Chinese companies infast-growing sectors such as renewable energyand digital solutions (cloud computing, artificialintelligence and Internet of Things) is expected.China’s RMB internationalisationgathers paceWith increased support from the Chinesegovernment and positive long-term economicprospects, Renminbi internationalisation willcontinue to expand. The BRI complements thecurrency’s internationalisation as it fuels thedemand for cross-border Renminbi services.As China-ASEAN trade and investment grow,wider usage and enhanced convertibility ofRenminbi will also simplify cross-border settlements. Chinese companies targetingASEAN can benefit from this via reduced foreign exchange risks, lower transaction costs,and more efficient cash flow management.With the People’s Bank of China’s announcement of the digital yuan, the role of centralbank digital currencies (CBDCs) in enablingand promoting cross-border trade is also akey highlight.Potential boost to regional tradeexpected post ratification ofthe Regional ComprehensiveEconomic PartnershipThe 2010 ASEAN-China Free Trade Area(ACFTA) was the first major initiative betweenChina and ASEAN, which has led to growingcross-border trade and investment. Morerecently, the RCEP Agreement is expected tousher in enhanced economic cooperation andtrade in the region, not only in goods but also inservices, once it is ratified. Trade between the15 signatories could increase by USD428 billionby 2030, according to the Peterson Institute forInternational Economics, with China’s exportsalone projected to rise by USD248 billion. Oursurvey respondents share positive sentiments,with almost 50 per cent of respondents lookingto increase their investment into ASEAN by 2550 per cent over the next 3-5 years, once RCEPis ratified.Several sectors within high-value manufacturing, energy, and digital, stand to benefit fromcross-border expansion with the magnitudeand growth potential of the China-ASEANcorridor. Chinese companies moving intoASEAN should focus on certain key themes tosucceed, including exploring partnerships formarket access, stronger digitalisation and cyberresilience, enhanced governance and risk management, and a greater focus on environmentaland social initiatives. These are explored furtherin the following sections.Borderless Business: China-ASEAN Corridor6

Overview of the China-ASEAN Corridor“ASEAN is core to Standard Chartered’sbusiness strategy. As the onlyinternational financial institution withpresence in 10 ASEAN markets, wecontinue to support our clients in tappingthe myriad of opportunities this regionhas to offer. In particular, and over ourmore than 160 years history in China,we have built strong relationships andpartnerships with Chinese corporatesin ASEAN from various sectors andindustries, offering them our sustainablefinance and digital solutions and helpingthem evolve their businesses, delivertheir internationalisation strategies andleverage the ASEAN opportunity.”Heidi Echtermann-ToribioRegional Co-Head,Client Coverage, AsiaCorporate, Commercial andInstitutional BankingStandard Chartered Bank“As Chinese companies with internationalexpansion aspirations continue to look forgrowth opportunities, ASEAN has clearlyemerged as one of their top choices, withits increasingly close trade relationshipwith China and more investmentopportunities brought about by thesigning of RCEP. We have been in Chinaand ASEAN for more than 160 years andhave an excellent track record helping ourChinese clients venture into the ASEANmarket. Clients in China tell us that theyare keen to invest in the 10-nation blocfor the long term, to capture the manyopportunities fuelled by governmentsand businesses’ focus on environmentalsustainability, supply chain optimisationpriorities and accelerating digitalisation.Standard Chartered has been with theseclients every step of their ASEAN growthjourney, extending our extensive crossborder financial products and servicesas well as local market expertise tohelp them succeed. We look forward tosharing our knowledge and insights onASEAN to help more Chinese companiesthrive in the region. There’s no better timethan now to invest in ASEAN.”Jean LuCo-head, Client Coverage, ChinaCorporate, Commercial andInstitutional BankingStandard Chartered BankBorderless Business: China-ASEAN Corridor7

Our Growth Watchlist:Three Sectors Drivingthe Future of theChina- ASEAN Corridor

Our Growth WatchlistASEAN, with a combined GDP exceeding USD3trillion and a population of over 600 million,has emerged as an economic powerhouse. TheASEAN-6 economies (comprising Indonesia,Malaysia, Philippines, Singapore, Thailand andVietnam) account for over 95 per cent of theregion’s GDP, with an established presenceacross global supply chains. Manufacturing,trade, and agriculture are the largest sectorsof ASEAN’s economy, while automotive,consumer electronics, renewable energy,e-commerce, and cloud services are the keysectors for future growth.Figure 3: Key Sectors in ASEAN-6 (by contribution to national GDP), 2020Note: Trade includes wholesale and retail tradeSource: ASEANStats1. High-Value Manufacturinggrowth in ASEAN driven byenhanced supplier capabilitiesand competitive production costsIn ASEAN, high-value manufacturing industriesare expanding, driven by improved suppliercapabilities and lower costs. This is bolsteredby a growing consumer market and supportiveregulatory policies. Automotive and consumerelectronics are two major sectors of focus forthis corridor.ASEAN’s automotive sector to see strongrecovery post-COVID-19ASEAN boasts a large automotive market,with sales of 2.5 million vehicles (excludingtwo-wheelers) in 2020, projected to grow at aCAGR of 9 per cent from 2020-25 driven by improving consumer sentiment and an economicrebound from COVID-19. Thailand, Indonesiaand Malaysia have the largest market share ofsales (75 per cent).Borderless Business: China-ASEAN Corridor9

Our Growth WatchlistFigure 4: Sales of Passenger and Commercial Vehicles in ASEAN-6Source: Fitch SolutionsASEAN’s ambitions to become a productionand export hub for automotives has catapultedmanufacturing activity. Companies located inASEAN are also selling beyond the region toAustralia, Japan and the United States. Automotive goods and accessories worth USD30.7billion were exported from ASEAN globally in2019. New and fast-developing segments suchas electric vehicles (EVs) and batteries, offerattractive propositions for Chinese automotivemanufacturers and suppliers to expand theirregional footprint.Demand for Electric Vehicles poised for growth, backed by government initiatives and incentivesThailandGovernment incentive schemes toindividuals and businesses (e.g. vehiclescrappage incentives) to drive demandand industrial policies (e.g. trimming ofexcise taxes for local EV manufacturing)designed to attract OEM manufacturingactivity, will be key growth drivers for thesector. Chinese automotive manufacturerssuch as SAIC Motors (2016) and GreatWall (2019) have invested in plants in thecountry to boost their regional footprint.IndonesiaMalaysiaEasing of vehicle loan requirements,suspension of a luxury vehicle tax, andgovernment policy encouraging EVuptake are expected to spur demand forpassenger and electric vehicles. Chineseactivity is advancing the development ofIndonesia’s Electric Vehicle sector acrossthe value chain with companies suchas Virtue Dragon Nickel Industry andZhejiang Huayou Cobalt in mining andTsingshan Steel and GEM in productionof batteries.Malaysia’s National Automotive Policy2020 is designed to drive developmentof the established automotive industry inemerging areas such as Electric Vehicles,Next Generation Vehicle (NxGV) andIndustry 4.0. The Energy Efficient VehiclesProgram for local assembly of hybridelectric vehicles is designed to furtherencourage local manufacturing and, inMarch 2021, three MoUs were signed between Chinese and Malaysian researchersto develop an NxGV hub in Malaysia.Source: Nikkei, Bloomberg, S&P Global, Nasdaq,Fitch: Indonesia Autos Report Q2 2021, Press ArticlesBorderless Business: China-ASEAN Corridor10

Our Growth WatchlistConsumer electronics in ASEAN offersmultiple opportunities across the value chainConsumer electronics sales (including computerhardware, audio-visual equipment and handsets) across the six major ASEAN economies (Indonesia, Malaysia, the Philippines, Singapore,Thailand, Vietnam) was estimated at USD39.5billion (2020) with a projected CAGR of 6.4 percent to reach USD53.8 billion by 2025. Handsetsaccount for the highest share (56 per cent in2020) while audio-visual equipment (includingtelevision sets, music systems, speakers, etc.) isprojected to be the fastest growing.Consumer electronics manufacturing and sectoral foreign investment is focused on Vietnam,Thailand and Indonesia, due to maturing supplier capabilities, lower labour costs, and available incentives. These countries possess thelargest markets for consumer electronics withcombined sales of USD25.7 billion in 2020 anda projected CAGR of 6.8 per cent (2020-2025).Expansion into ASEAN can benefit Chinesecompanies thanks to lower manufacturing costsand quicker access to a fast-growing market.Figure 5: Sales of Consumer Electronics in ASEAN-6Markets covered: Indonesia, Malaysia, Philippines, Singapore, Thailand, VietnamSource: Fitch SolutionsLower labour costs and additional incentives attracting consumer electronics manufacturers to ASEANVietnamTrade openness, low labour costs, andsupportive industrial policies in Vietnamare encouraging foreign investment intosetting up assembly plants in Vietnam,driving production for exports. Mobilephones are the focus of Vietnam’s consumer electronics manufacturing withSamsung and LG being two of the largestforeign investors in this segment.ThailandIndonesiaElectronics is the second largest sectorattracting foreign investment into thecountry, including major manufacturers ofcomputer hard drives as well as electricalappliances such as air conditioners andrefrigerators. Top manufacturers havinga presence here include Western Digital,Seagate, Electrolux and Schneider. Inorder to further develop the electronicsmanufacturing industry, the governmentis providing manufacturers incentives suchas exemptions on import duties on rawmaterials and exemptions on income taxfor projects in special industrial zones.Indonesia’s low labour cost makes it anattractive manufacturing location, andthe government is making further effortsto attract foreign investors by offering taxand land concessions for local manufacturing. Production of TVs and set topboxes has historically been a mainstayof Indonesia’s consumer electronicsindustry. There has also been increasedmanufacturing activity in printers andmobile handset assembly in recent yearswith Chinese smartphone brands Oppo,and Xiaomi also setting up plants in thecountry.Borderless Business: China-ASEAN Corridor11

Our Growth Watchlist2. Ramp-up in demand forenergy and resources in ASEANincludes focus on renewablesourcesUrbanisation and increased consumptionhave intensified ASEAN’s need for energy andresources, but conventional sources of energyhave adverse health and environmental consequences. Therefore, ASEAN is ramping up itsfocus on renewable energy, with some countriesinvesting in waste management projects tocounter the effects of climate change. Responsible for 10 per cent of the world’s population, itis imperative that ASEAN member states adoptgreen measures and prioritise to increase ASEAN’s renewable energysupply to 23 per cent of total primary energyby 2025. This will require new investments witha focus on greater installed power capacity forrenewable energy across the region.In 2020, electricity generated from renewablesources (excluding biomass and waste) was 214TWh, which is expected to reach 271 TWh by2025, given a CAGR of 4.8 per cent. Solar powergeneration has been identified as the fastestgrowing segment (CAGR 16 per cent between2020-25) and a key focus area for Chinese investments and partnerships in ASEAN.Regulatory policies around renewableenergy expected to drive growth andaddress increased energy needsGlobally, ASEAN’s electricity consumptionhas been amongst the fastest growing. CAGRwas 6 per cent over the past 20 years, withconsumption levels at 994 terawatt-hours(TWh) in 2020 and expected to reach 1287terawatt-hours by 2025. To reduce carbonemissions, the ASEAN Plan of Action and Energy Cooperation (APAEC) 2021-2025 has set aFigure 6: Renewable Energy Generation in ASEAN (excluding Biomass & Waste)Source: Fitch SolutionsBorderless Business: China-ASEAN Corridor12

Our Growth WatchlistASEAN markets are increasingly focusing on growing renewable energy generation, with ambitiousgovernment targets and sizeable projects in the pipelineThailandSolar is a key growth segment in Thailand’s renewable energy industry pushedby initiatives such as the Energy Ministry’sSolar Rooftop Scheme. In April 2020,China Energy Engineering Corp won acontract to install a photothermal andphotovoltaic power station in Thailand.VietnamPhilippinesSolar and wind energy show the maximum growth potential in Vietnam. Thegovernment has emphasised the offshorewind sector under Vietnam’s NationalEnergy Development Strategy. Chinesesolar companies are increasingly movingproduction to Vietnam with Trina Solarcompleting a solar power plant and LongiSolar acquiring a production facilityin 2020.Renewable energy is expected to accountfor 35 per cent of the country’s power mixby 2030 as per the latest energy targets.Geothermal energy (currently accountingfor 70 per cent of renewable generation) will now allow 100 per cent foreigninvestment. As per the country’s EnergyPlan 2040, there will be a stronger focuson solar projects as the country looks toincrease capacity. In 2020, Chinese firmJiangsu Seraphim Solar Projects signedan agreement to supply solar modules forsolar farm projects in the Philippines.Borderless Business: China-ASEAN Corridor13

Our Growth WatchlistCircular Economy: Waste-to-Energy (WtE)a scalable opportunity to combat growingurban waste and energy needsASEAN’s urban population is expected toexceed 400 million by 2030, reinforcing theneed for efficient and sustainable wastemanagement solutions. Despite nationalwaste management policies and frameworks,many countries still rely on open dumping andburning, given poor technological infrastructure,financing, policy, and stakeholder participation.A United Nations Environment Programme(UNEP) report, ‘Waste Management in ASEANCountries’, suggests that changing one’sperspective – seeing waste as a resource ina circular economy model with public-privatepartnerships – can address the challenge moreholistically. Singapore has been the regionalleader in adopting WtE practices, with astructured waste management system andfour WtE plants. Since Singapore’s success, WtEhas increasingly been considered in Indonesia,Thailand, and Vietnam as a sustainablesolution. Overall energy generation frombiomass and waste in ASEAN is projected toincrease from 31.2 TWh in 2020 to 40.8 TWhin 2025, at a CAGR of 5.5 per cent.Figure 7: Energy Generation from Biomass and Waste in ASEANSource: Fitch SolutionsChinese companies increasing their participation in WtE projects in ASEAN marketsIndonesiaThe Indonesian government has beenencouraging cities to build WtE plants asa solution to the growing issue of waste.In 2018, China-based Zheneng Jinjiang(formerly Jinjiang Environment) acquiredIndo Green Power for a WtE project inPalembang.ThailandVietnamThe country has several WtE projects indevelopment, with a target of achieving550MW by 2036 under the Alternative Energy Development Plan. In 2021, the ThaiMetropolitan Electricity Authority (MEA)signed an MoU with Chinese-owned company Newsky Energy for two WtE plantsin Bangkok.The Vietnamese government has introduced fiscal tax exemptions for WtE projects to encourage investment in the area.Chinese company Everbright has committed to developing WtE plants in primaryand secondary cities in the Mekong Deltathat supply electricity to the local grids.Borderless Business: China-ASEAN Corridor14

Our Growth Watchlist3. Opportunities in ASEAN’sICT services market expectedto flourish with rapid rise indigitalisationASEAN is one of the fastest growing marketsfor digital services, with 400 million internetusers and a thriving digital ecosystem. Rapiddigitalisation across the region offers severalopportunities for businesses, especially in thee-commerce and cloud services sectors, to growrapidly and reach new customers.E-commerce: ASEAN is well-positionedfor continued growth due to favourablemarket conditionssuch as Lazada, Shopee, and Tokopedia. Regional demand for e-commerce services (including online retail, online travel, online media,transport and food) has gained significantmomentum during COVID-19, as seen in the sector’s upsurge in gross merchandise value (GMV)across the six markets (USD104 billion) in 2020.The industry is projected to grow at a CAGR of24 per cent to reach a GMV of USD309 billionby 2025. Rising income levels and increasedconsumer preference for shopping online, combined with an improved digital and logistics infrastructure, is expected to drive future growth.In fact, leading Chinese e-commerce playersAlibaba and have already invested inASEAN.Recently, e-commerce ASEAN has witnessedspectacular growth and given rise to playersFigure 8: E-Commerce GMV in ASEAN-6CAGR 24.3%USD billion309300354210446Markets covered: Indonesia, Malaysia, Philippines, Singapore, Thailand, VietnamSource: Google & Temasek, e-Conomy SEA, 2020Borderless Business: China-ASEAN Corridor15

Our Growth WatchlistStrong government support in key ASEAN markets likely to further accelerate e-commerce growthIndonesiaWith the aim of attracting technology-related investments, the governmenthas established friendly foreign directinvestment policies and allows 100 percent foreign ownership of e-commercebusinesses. In 2018, Alibaba led a USD1.1billion funding round in local e-commercestart-up, Tokopedia.ThailandVietnamThe government’s National E-CommerceStrategy (2017-2022) and initiatives suchas the PromptPay e-payment service havesupported the growth of e-commerce inthe country and made it an attractivedestination for investments. In 2018, Chinese online retailer partnered withThailand’s Central Group to launch JDCENTRAL e-commerce platform.The government’s National E-CommerceDevelopment Plan for the 2021-2025period is focused on boosting e-commerceadoption and envisions that 55 per centof the population will shop online by 2025and average annual consumer spendingonline will rise to USD600 by 2025, upfrom USD202 in 2018. has investments in local e-commerce company, Tiki.Source: Reuters, Bloomberg, Nikkei, E-Marketer, Press ArticlesBorderless Business: China-ASEAN Corridor16

Our Growth WatchlistAccelerated digital transformation ofcompanies in ASEAN expected to propeldemand for cloud servicesIncreased demand for cloud services due to rapid digitalisation during COVID-19, coupled withdigitally maturing businesses in the ASEAN, offerexpansion opportunities for Chinese cloud orPlatform as a Service (PaaS) providers in areassuch as artificial intelligence, machine learning,IoT, and data analytics. Cloud spending amongthe six leading ASEAN economies is estimatedat USD4.26 billion and a forecasted CAGR of 26per cent (2019-24), with Vietnam as the fastestgrowing (34 per cent CAGR).As businesses in Southeast Asia become moredigitally mature and invest in technologies suchas artificial intelligence, machine learning, IoT,and data analytics, further opportunities forChinese Platform as a Service (PaaS) providersare expected.Figure 9: Cloud Services Spending in ASEAN-6Markets covered: Indonesia, Malaysia, Philippines, Singapore, Thailand, VietnamSource: Google & Temasek, e-Conomy SEA, 2020Cloud services providers from China are making a foray into ASEAN marketsIndonesiaGrowing demand for data services duringthe pandemic and government regulations requiring public entities to storedata locally has spurred the growth ofthe domestic cloud industry and attracted leading cloud players. Chinese cloudcomputing company, Alibaba Cloud,which already operates two data centresin Indonesia, announced plans to open athird data centre in the country in 2020.SingaporeVietnamThe city-state has been the preferred destination for cloud vendors due to its strongbusiness and regulatory environment,robust zoning laws, and well-definedguidelines for data centre construction. In2020, Singapore-based Asia Digital BankCorporation (ADBC) signed an MoU withChina-based Tencent Cloud to use the latter’s financial platform to provide digitalbanking services to SMEs.The manufacturing sector in the countrywill be a major beneficiary of the ongoing diversification of supply chains dueto the US-China trade war and Covid-19pandemic. As supply chains in the countrymature and move up the value chain,demand for cloud-based automation andindustrial services is expected to increase.Borderless Business: China-ASEAN Corridor17

Acting with Impact:Five Focus Areas forChinese Companiesto Drive ResilientGrowth in ASEAN

Acting with ImpactBuilding a successful business beyond domesticshores, particularly in a fast-evolving businesslandscape like ASEAN, will require focus onseveral areas.As shown in figure 10 below, Chinese companies targeting ASEAN are considering multipleareas to remain competitive in the region, withthe highest focus on digital transformationprogrammes that are being prioritised or accelerated following the pandemic. Companies arealso paying particular attention to engaginglocal partners and driving sustainability / ESGinitiatives as they venture into the region, andare also mindful of the importance of developing ASEAN-specific risk management practicesfor long term resilient growth.Figure 10: Key focus areas to drive resilient growth in ASEANNote: Survey question asked: ‘What are the key initiatives / focus areas for your organisation to drive resilient and rebalancedgrowth in ASEAN? Please select the relevant options and rank them in order of importance, 1 being the most important.’Values indicated above refer to the % of survey respondents who included the initiative as one of the top 3 ranked choicesSource: Standard Chartered Survey, 2021Borderless Business: China-ASEAN Corridor19

Acting with Impact1. Diversification of productionnetworks and supply chains tomitigate risk whilst enhancingresilienceChanging market fundamentals and emergingrisks due to trade tensions and COVID-19 aredriving companies to rebalance their supplychains and make them more resilient. Higherwages and stricter environmental regulationsin China have affected profitability, pushing agrowing number of Chinese manufacturers toexpand their production presence to ASEAN,prioritising locations with lower costs, a robustmanufacturing ecosystem and added incentives. Overall, companies are choosing to maintain their footprint in the Chinese market whilstestablishing an additional manufacturing presence in another geography – a strategy commonly referred to as ‘China Plus One’.Build ‘profitable redundancy’ in supplychains to drive resilienceWhereas companies have historicallyfocused on cost efficiency of their supplychains, disruption caused by eventslike trade wars, climate disasters andCOVID-19 have pushed risk managementup the agenda for most manufacturersand gave way to building in redundancy tomaintain resilience during crises. Taking thisone step further, the use of digital solutionsto improve visibility and transparency,along with a “just-in-case” approachtargeted to higher-value customers, willenable companies to not only enhancetheir supply chain responsiveness andresilience but also provide a premiumcustomer experience, which can becommercialised.Our survey results illustrate this shift, with 44 percent of respondents listed “diversification of production footprint” as a major driver (among topthree) for expanding into ASEAN.A. Understand ASEAN’s diverse industriallandscapeSite selection, setting up new production plantsor acquiring new procurement networks will require companies to understand ASEAN’s manufacturing diversity. Varying regional landscape: ASEAN’s industrial ecosystem varies across countries, depending on economic traject

Economic Partnership The 2010 ASEAN-China Free Trade Area (ACFTA) was the first major initiative between China and ASEAN, which has led to growing cross-border trade and investment. More . Australia, Japan and the United States. Auto-motive goods and accessories worth USD30.7 billion were exported from ASEAN globally in

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