What a globalising China means for ASEAN: Two-way benefits on the rise

A new report from HSBC Global Research outlines the following:

• Trade between China and ASEAN reached USD358bn in 2013, up from only USD37bn in 2000
• Rising levels of investment in both directions represent the next phase in the relationship
• This benefits a number of sectors – especially banking, manufacturing and real estate – and is also having an impact on how equities behave across the region

Key numbers

- ASEAN combined would be the seventh largest economy and the third most populous country globally, with a combined GDP of USD2.4trn in 2013 and a population of 600m.
- Since 2002, the tariffs for more than 90% of the goods in the ASEAN-China Free Trade Area have been reduced to close to zero.
- About 12% of ASEAN’s exports went to China in 2013, up from 6.5% in 2003; more than 16% of ASEAN’s imported goods came from China in 2013, up from less than 8.5% in 2003.
- China has been ASEAN’s largest trading partner since 2009, while ASEAN has been China’s third largest trading partner since 2010.
- Bilateral trade between China and ASEAN surpassed USD358bn in 2013, up from only USD37bn in 2000.
- Around 25% of China’s coal imports originate from Indonesia, more than from any other country.
- Annual growth of cumulative FDI from China to ASEAN averaged 54% over 2003-12. The numbers for Singapore, Laos and Myanmar were 62%, 81% and 89%, respectively.
- ADB’s Regional Investment Framework in the Greater Mekong Subregion has about USD51.5bn of projects in its pipeline.
- China’s Exim Bank has lent more money than the World Bank to developing countries. It has provided credit support to build or renovate 24 highways, 3 railways, 1 port, 3 airports and 9 bridges in the Mekong region and ASEAN.
- China has proposed setting up an Asia Infrastructure Fund, resembling the ADB in form and function, with up to USD100bn in start-up capital.
- Investments are led by Chinese state-owned enterprises (SOEs), at more than 80% of flows so far.
- China Railway Group (CRG) is planning a USD9.6bn project which could be the largest ever FDI in Cambodia. CRG’s USD4.8bn Indonesia coal railway project is the largest single Chinese FDI initiative in ASEAN.
- Chinese investment group Bright Ruby set a record for a private-sector property transaction in Singapore by purchasing Park Hotel Group for USD1.2bn in 2013.
- Thailand’s Charoen Pokphand (CP), one of China’s first foreign investors, now has more than 200 subsidiaries in food processing, retailing, and other businesses.
- ICBC Singapore branch has opened accounts for several central banks in the region to facilitate depositing RMB converted from US dollar reserves.
- RMB60bn in foreign exchange trading and RMB150bn in cross-border RMB settlements were conducted with ICBC Singapore Branch in 2013.

The report was written by Herald van der Linde, Head of Equity Strategy, Asia-Pacific, Trinh Nguyen, Asian Economist and Qu Hongbin, Co-Head of Asian Economic Research 經濟研究亞太區聯席主管 屈宏斌.