Chinese investors head to Southeast Asia for acquisitions as they face rising barriers in the US and Europe. .

Chinese investors head to Southeast Asia for acquisitions as they face rising barriers in the US and Europe.

Southeast Asia is the preferred investment destination among Asia-Pacific executives, though Chinese firms need to tread carefully in the region

Baker McKenzie survey finds previous hotpots of Europe, Britain the UK and the United States falling out of favour

Corporate executives in the Asia-Pacific region remain upbeat on international investments, ­although interest in Southeast Asia has begun to displace previously favoured destinations, ­according to a survey by law firm Baker McKenzie.

Destinations such as Europe, Britain and the United States have fallen out of favour, overtaken by Thailand, Vietnam and other Southeast Asian nations, according to the survey, which polled 600 executives in the Asia-Pacific.

Across all firms surveyed, 88 per cent of respondents said their firms were more interested in international expansion, be that acquisitions, investments or listings, over the next two years.

The report’s authors found that China’s “Belt and Road Initiative” remained important to the strategy of Hong Kong and ­Chinese companies

“Southeast Asia remains a key region for {belt and road] investments, with infrastructure and power investments leading the way, followed by manufacturing, financial services and e-commerce. [Belt and road] investment is expected to be active over the next one to two years, covering more jurisdictions and more industries.

Other analysts said the sources of funding for such projects was expected to change over time.

“By 2030, we expect that a large proportion of belt and road-related projects will be funded not just by Chinese money but a mix of private capital, multilateral banks, export credit agencies and foreign lenders,” said Martin David, Asia-Pacific head of Baker McKenzie's projects group.

“That said, Chinese lenders are always likely to be a core component of every BRI project.”

 The report noted that Southeast Asia offered good economic growth rates and substantial market size, as well as a degree of cultural affinity for Chinese companies that may not exist in the US or Europe. The survey found that gaining access to new markets was a major drawing card for international companies, while lowering production or labour costs was considered relatively less important. Asset valuation was also deemed more reasonable than in China or developed economies.

Munir Abdul Aziz of Baker McKenzie Kuala Lumpur said that Southeast Asia was expected to become the world’s fourth largest economy by 2030, and that multinational corporations were deepening their foothold in the region.

“Historically paternalistic practices are giving way to greater openness and more creative approaches that place consumers at the heart of business strategy,” he said.

However, Chinese companies will need to be aware of the importance of garnering trust when they expand into new markets in Southeast Asia.

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