Chinese investment in ASEAN rising

http://www.atimes.com/atimes/China_Business/IK01Cb01.html

China Business
Nov 1, 2007

NANNING, China - More and more Chinese businesspeople are launching and expanding their businesses in Southeast Asian countries, counterbalancing previous capital flows in an overwhelmingly single opposite direction, officials and businessmen said at an ongoing exposition.

Mochtar Riady, chairman of Malaysia's renowned Lippo Group, said Chinese businesses have accumulated an abundance of capital in the economic boom over the past 30 years, leading to a strong desire to invest overseas, while some member states of the 10-member Association of Southeast Asian Nations (ASEAN) wanted investment, especially in infrastructure projects.

ASEAN will be "the main destination of China's growing overseas investment in future", the Chinese-Indonesian billionaire said at the China-ASEAN Expo in Nanning, which was due to close on Wednesday.

ASEAN member states have invested a total of US$41.9 billion in China since the country began it reform and opening up drive in late 1978, according to statistics from the China's Ministry of Commerce.

With China's fast development, Chinese investment in ASEAN countries increased rapidly in recent years. In a single move at the exposition, China's Guangxi State Farms Group alone inked 42 investment projects with ASEAN enterprises, involving a total value of 19 billion yuan (US$2.5 billion).

So far, more than 1,000 Chinese companies have made investment in ASEAN member countries, mainly in sectors such as agriculture, manufacturing, mining, tourism, electricity and infrastructure construction.

In the first two days of the China-ASEAN Expo which opened on Sunday, businesses from the two sides reached agreements on 92 projects. Under the pacts, Chinese companies will invest $1.19 billion in 37 projects in ASEAN countries, while ASEAN businesses will put $2.81 billion in another 55 projects in China.

"Capital flow in both directions, rather than the previous single-direction movement, has emerged as a new trend within the China-ASEAN cooperation," said Zhang Jian, a professor of China-ASEAN studies at Guangxi Normal University.

China and ASEAN countries have been pushing hard for the birth of the world's most populous free trade area in the region targeted for 2010.

Chinese Vice Premier Zeng Peiyan has called on the two sides to expand investment in both directions within the framework of regional cooperation.

China and the ASEAN are in talks over easier access for investors to each other's market, and an agreement is expected as early as next year, a spokesman for China's Ministry of Commerce revealed.

At the Expo, Chinese and Southeast Asian officials and financial experts on Tuesday urged the countries to strengthen financial cooperation, stressing it is crucial to stability in countries, the region and the world as a whole.

Ten years after the financial crisis that swept Asia and crumbled the results of development in many Asian countries, especially those in Southeast Asia, to dust, financial experts gathered in the south China city of Nanning to discuss what should be drawn from the "bloody lesson".

"We have learned from the crisis that only by strengthening financial cooperation can we ensure stability," said Ng Lip Yong, Malaysia's vice minister of trade and industry, at a forum during the four-day China-ASEAN Expo. "If we had had an effective financial cooperation mechanism at that time, the financial crisis might have been avoided," he added.

Now it has become a consensus of economists in China and Southeast Asian countries to accelerate financial cooperation to meet the demand for guarding against financial crisis and establishing a free trade area covering China and ASEAN members. China is not a ASEAN member country, though it is part of the larger ASEAN Regional Forum.

Under such circumstances, dialogue on regional fiscal and financial policies cooperation in institutional capacity building has been strengthened, while leading financial institutions have targeted other countries in the region as their potential market.

However, Bank of China's vice president Wang Yongli warned it is a must to strengthen a country's financial system and regulation. "Establishing a sound financial system in a country could avoid financial bubbles and risks from increasing to some extent," Wang said.

Chartsiri Sophonepanich, president of the Bangkok Bank, Thailand, called for better management of capital and foreign exchange reserves of ASEAN and China.

The China-ASEAN region has become one experiencing the fastest economic growth in the world, holding about half of the world's foreign exchange reserve. "If we only rest on buying US Treasury bonds with our foreign exchange reserve, it will not bring any force to drive our economic development," he said.

The Thai banker suggested using foreign exchange reserves to invest in the Asian bond market, which, together with the establishment of an even wider regional bond and financial market and effective regional financial cooperation and coordination, could help reduce the adverse impact of unpredictable economic crises.
He also called for the establishment of an Asia monetary organization to facilitate trade and investment in the region.

Mochtar Riady, chairman of Indonesia's Lippo Group, suggested taking the Chinese currency as the basic currency for regional trade cooperation and designing an Asia dollar based on it.

Zhai Kun, senior Chinese researcher on Southeast Asia studies, urged academic circles to cooperate in the study of financial crises to be able to make quick judgments and predictions before a crisis arises.

However, financial experts say, as China and ASEAN member countries enhance financial regulation and participate in international financial cooperation, their ability to guard against and deal with crises has improved markedly.

[Asia Pulse/Xinhua News Agency]