5 good reasons for companies to invest in the Asia-Pacific region

China, a major exporter, is also a desirable market for European companies, and the entire Asia-Pacific region is an interesting market from an economic and technological point of view.

1. Crowded and growing market

The Asia-Pacific region is home to 4.3 billion inhabitants, or 60% of the world’s population. With 1.4 billion people, China is not only the most populous country in the world, but also the world’s second largest economy, and it’s growing. The standard of living of the Chinese population is rising, and by 2030 China’s middle class, the world’s largest, is projected to account for a quarter of global consumption.

The entire Asia-Pacific region is a market with great potential. The Southeast Asia region is particularly interesting, with a GDP of $3,080 billion in 2020, a sharp increase from previous years. The region is projected to become the world’s fourth largest economy by 2030.

2. Tech-savvy population

For years, technology has been an integral part of people’s lives in the Asia-Pacific region. The Japanese and South Koreans in particular are known for their innovation and extensive use of modern technology. The Southeast Asia region is the fastest growing internet market in the world with 125,000 new users daily. China has by far become the most tech-savvy country, where most of the world’s e-commerce sales take place. Nearly two-thirds of the population (nearly a billion people) use smartphones, and more than a third pay for their purchases using WeChat Pay or Alipay, the country’s main online payment platforms. In the World Economic Forum report, China ranks first in the global digital competitiveness ranking by a wide margin (Indonesia is also in the top ten). Its technological nature is an important factor in the economic development of the country.

The government intends to digitize Chinese industry through its Made in China 2025 plan, which aims to modernize and increase sustainability. In the south of the country, in the Guiyang (贵阳) region, for example, more than 85% of local factories use cloud technology.

3. The largest 5G network in the world

All technological development relies on digital infrastructure. Connections must be fast, stable and of high quality. If Europe is one of the leaders in the development of 5G, then it is far from in its deployment. If the trends are confirmed, by 2026 5G will account for only 35% of the networks in use in Europe.

Chinese companies are far from these concerns: there are 1,425,000 5G stations scattered across the country, or 70% of the stations deployed worldwide. Even at the top of Everest, travelers can enjoy uninterrupted 5G connectivity thanks to the world’s highest station located at 8,848 meters by China Telecom. The lowest station is also in China, at the Xinyuan coal mine in Shanxi province, 534 meters below the Earth’s surface.

Local industry will be the first to benefit from this 5G infrastructure as it forms the basis for fully digital and increasingly automated smart factories. For example, 100 specific projects have already been planned, 1000 more will follow.

5G expansion continues in China, with coverage targets set for 2023. 560 million inhabitants must have access to the 5G network. On the other hand, the Chinese government decided in March 2020 to invest $4.8 trillion not only in 5G rollout but also in building new data centers, artificial intelligence and smart factories.

Other countries of the Asia-Pacific region did not stand aside. South Korea, for example, has rolled out its first 5G network, which should support 60% of mobile communications by 2025. 5G is already available in 85 cities there. It is available in 24 cities in Thailand, the same number as in France. In Southeast Asia, 5G is eligible for funding. By 2025, 200 million people will be able to access 5G.

Singapore, which implemented 5G in 2020, became the first country to develop 5G in the Southeast Asia region. Its goal is to cover its entire territory by 2025. Vietnam, Thailand, Malaysia and the Philippines have the same goal.

4. An increasingly mixed economy

The role of industry varies greatly from country to country in the Asia-Pacific region and is highly dependent on economic and socio-economic development. Like China, long considered the workshop of the world, which has experienced strong economic growth since the early 1990s thanks to the export of all types of mass-produced products. Between 2007 and 2017, manufacturing costs in China rose by 60% due to this development.

This is why the Chinese government has been promoting a new normal since 2014: a transitional phase during which economic growth is 6-7%. Although China is still the world leader in manufacturing and exporting, the share of industry in GDP has been steadily declining over the past decade (the “Made in China 2025” plan is not accidental). At the same time, the share of services has jumped more than 10% since 2010 and now makes up the bulk of GDP. In Beijing, this proportion even reached 83.1% in 2019.

This development is noticeable in other countries of the Asia-Pacific region. The most developed economies are more concentrated in services, while agriculture and industry are in decline. For example, Hong Kong and Singapore developed their economies at the expense of industry, but gradually moved to the service sector. South Korea is a special case: considered a developed country, the share of industry in GDP is still very high. India, a developing country, is developing along the same lines as China. The service sector accounts for 53.89%, industry 25.92% and agriculture 20.19%. Other countries in Southeast Asia, such as Vietnam, Indonesia, Thailand and Malaysia, are also moving from an industry-based economy to a service-based economy, although at a slower pace than in China and India, with industry still accounts for the bulk of GDP.

For foreign manufacturers, this change of direction in the Asia-Pacific region represents a real opportunity. Smart technologies, process automation and robotics can become competitive advantages. They not only help increase efficiency and productivity, but also comply with and optimize safety regulations.

5. The advantage of foreign skills

Asia-Pacific factories are highly specialized: electronics in Malaysia and Vietnam, automobiles and foodstuffs in Thailand, machinery and petrochemicals in Indonesia, semiconductors, foodstuffs and home appliances in the Philippines, pharmaceuticals and aerospace components in Singapore. This lack of diversification could pose challenges for some countries in the future, especially in terms of global scarcity and unstable supply chains.

It is precisely because it wants to avoid this delicate situation that China has decided on its Made in China 2025 plan. However, despite the rapid development, China’s industry still has some shortcomings. In the past, the company thought about high-volume production, which was its forte, now it must refocus on quality and durability. She knows about it, but the transition is slow. And compared to leading industries such as Germany, Japan and the US, China lags behind in efficiency and structural optimization.

According to a 2017 study, there are few development opportunities for skilled workers in China. More than a third of respondents regret the lack of qualifications and skills. One reason for this is that industrial training in China is not up to Western standards. At the same time, intellectual professions are valued much more than factory labor, which does not attract qualified young people.

For European companies, this is an opportunity to share their experience and position themselves in the Chinese market. China not only values ​​the quality of European industrial products, but is also Europe’s largest trading partner. With €586 billion worth of imports and exports of goods in 2020, trade between China and the European Union (EU) accounts for 16% of all EU trade in goods.

The EU is working hard to ensure healthy competition in China. For example, the Global Investment Agreement (GIA) concluded with this country is the first step towards a wider opening of the Chinese market for companies from the European Union. This agreement includes, among other things, a ban on the forced transfer of technology and the obligation of state-owned enterprises to comply with market standards.

For all these reasons, the Asia-Pacific region is a promising market for European companies. The largest market in the world with a tech-savvy population that loves European know-how. In addition, conditions have been met to enable European companies to find a place for themselves in an economy seeking to diversify. From a technological point of view, 5G facilitates exchange with suppliers and partners, as well as communication with the consumer.