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Southeast Asia: The Prime Destination for Chinese Companies to Tap into Global Markets
As globalization becomes an inevitable challenge for Chinese companies, Southeast Asia stands out as a key market that cannot be overlooked. ASEAN, one of China’s most significant trade partners, has experienced rapid integration into the Belt and Road Initiative (BRI) over the past decade. Every ASEAN member country has signed bilateral cooperation agreements with China under the BRI, broadening the scope for mutual growth and development with the rest of the world.
"Not entering Southeast Asia is equivalent to losing half of the global market." As one of the top destinations for Chinese companies expanding abroad, Southeast Asia currently attracts 10% of the world's foreign direct investment (FDI). By 2040, the region's GDP is projected to exceed $13 trillion. The region's dynamic economic growth, youthful and sizable population, and rising consumption power make it highly attractive. However, Southeast Asia also poses significant challenges to foreign companies due to its fragmented markets, with variations in language, culture, and policy across countries.
Why Choose Southeast Asia?
Southeast Asia has emerged as a priority market for Chinese companies, particularly developers, thanks to several key factors, including a maturing mobile internet infrastructure, a large and youthful population, and the increasing prevalence of social media users.
Improving Internet Infrastructure and Mobile Device Penetration
According to data from Statista, mobile network coverage across Southeast Asia exceeds 90%, providing a strong foundation for seamless internet access. This extensive network coverage, combined with the widespread adoption of smartphones, has created a highly connected environment. As of 2022, smartphone penetration in the region reached 75.62%, driving a "mobile-first" mentality among users. The improving internet environment and widespread device adoption have nurtured habits where users are highly engaged online, with daily mobile internet usage in countries like the Philippines and Thailand exceeding 5 hours.
The convergence of a mature network environment, user behavior centered around mobile devices, and the vast technological potential of the region has led to a thriving mobile application market across Southeast Asia.
The improving mobile payment infrastructure in Southeast Asia has fueled a surge in the number of users utilizing mobile payment applications, which in turn has accelerated the growth of in-app purchases, especially in mobile gaming. According to data from Allcorrectgames, Southeast Asia’s mobile gaming market has shown consistent growth, with a positive outlook for the future. While consumer spending power remains lower compared to more developed markets like the U.S. and Japan, Southeast Asian users are showing an increasing willingness and capacity to spend.
Geographic proximity and similar consumer preferences have made Southeast Asia a prime destination for Chinese developers expanding abroad. For example, in Thailand, Chinese mobile game developers have captured more than one-third of the mobile gaming revenue for three consecutive years, as reported by Data.ai. This cultural affinity has helped developers achieve strong results in the region.
Government policies across Southeast Asia have a significant impact on local economic conditions and on foreign companies expanding into the region. These policies address areas like competition, ESG (Environmental, Social, and Governance) standards, and foreign investment.
Malaysia: The 2023 national budget introduced several tax incentives to promote investment in key industries, including electric vehicles, renewable energy, and electronics. These include tax exemptions for the electric vehicle industry, capital subsidies for companies investing in automated equipment, and tax reductions for employing foreign workers.
Thailand: The country maintains stable policies to support foreign investment, addressing taxation, immigration, and local talent development.
In terms of market access, Malaysia operates an open economy, allowing foreign investors to hold 100% equity in most sectors. However, certain industries are closed to foreign ownership, while others impose restrictions on foreign equity participation through structured ownership rules. In contrast, Singapore offers more flexibility in corporate structures and foreign ownership, with fewer restrictions on participation by foreign investors.
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In terms of the business environment, Singapore offers a highly competitive corporate tax rate of 17%, which ranks among the best globally for developed countries. It also provides a variety of tax incentives and reductions that support business growth. The Singapore government has streamlined the process of setting up a company, with the Accounting and Corporate Regulatory Authority (ACRA) offering an online platform that enables companies to complete the necessary registration paperwork within a single day.
Moreover, awareness around ESG (Environmental, Social, and Governance) issues in Southeast Asia is increasing. Environmental concerns such as emissions and resource usage are high-priority issues, while labor practices, diversity, and inclusion are gaining significant attention in the social sphere. In terms of sustainable economic development, Malaysia's government is particularly welcoming to industries aligned with ESG principles.
In Bangkok, where the United Nations' Asia headquarters is located, many multinational companies have chosen to establish their regional headquarters. While Thailand's population is smaller than Indonesia’s, its stronger consumer purchasing power makes it a prime destination for businesses expanding into Southeast Asia. Many companies opt to base their regional headquarters in Thailand to cover the broader Southeast Asian region.
Compared to high-cost and heavily regulated markets like the U.S. and Europe, Southeast Asia is becoming a focal point for Chinese pharmaceutical companies. As an emerging center for production, trade, and consumption, the region attracts global capital due to its geographical advantages and demographic dividends. China's relationship with Southeast Asian countries continues to strengthen, supported by policies like the Belt and Road Initiative, China-ASEAN Free Trade Area 2.0, and the Regional Comprehensive Economic Partnership (RCEP). These agreements have tightened economic connections, fostering deeper, more diverse, and more regulated trade and investment cooperation. Against this backdrop, the healthcare industry has become a hot spot for Chinese investment in Southeast Asia.
Southeast Asian companies can generally be divided into three categories:
Large Multinational Corporations, such as Novartis, which dominate the market.
Large Domestic Enterprises, which tend to be conservative and limited to their home countries.
Local and Foreign Manufacturing Companies, which are numerous but often struggle with profitability and weak production technologies. Singapore is one of the few countries in the region with advanced biotech companies.
Overall, the pharmaceutical sector in Southeast Asia is dominated by generics, with a pressing need for industrial upgrades. If local companies can access Chinese capital and technology, especially in biopharmaceuticals, they could experience rapid development, presenting systematic investment opportunities.
From 2015 to 2023, Chinese companies invested more than $6.619 billion in Southeast Asia's healthcare market, with annual deal volumes increasing from an average of 3 per year (2015-2017) to 9 per year (2021-2023). The total transaction amount rose from $533 million in 2015 to $1.596 billion in 2022.
Southeast Asia offers immense opportunities but also presents challenges due to the diverse population, political environments, and business cultures in its various countries. Chinese companies often lack the understanding of local market entry requirements, business environments, and scalability. Additionally, their international talent pool and management experience may be insufficient.
For example, in Indonesia, the regulatory landscape is highly complex, with various government departments impacting policies. In some regions, laws differ from those of the central government, and businesses may need to obtain numerous certificates and licenses before operations can begin. There are also significant regulatory requirements, including those concerning local raw materials, Halal certification, environmental impact assessments, and data protection.
In addition to regulatory challenges, business culture is key to successful market integration. In Singapore, there is a strong emphasis on efficiency and work-life balance. Government regulations strictly control working hours and overtime compensation, with many companies adopting a hybrid work model (3 days in the office, 2 days working from home). This is an essential condition for attracting young talent.
In contrast, personal relationships and trust are critical in Indonesia’s business culture. Many business transactions are built on strong personal relationships, and flexibility is essential when scheduling work and meetings, as time management tends to be more relaxed.
Local companies in Southeast Asia have a deep understanding of national policies and business cultures, often making them formidable competitors for Chinese firms. For companies expanding abroad, finding the right local partners and planning strategically are crucial for success.
MICI International, a renowned brand in overseas study tours, has long been committed to helping Chinese entrepreneurs explore international markets. By offering diverse services and opportunities, MICI International continues to assist Chinese businesses in connecting with resources across Southeast Asia, helping clients swiftly integrate into local cultures and business environments to ensure the smooth execution of localization projects.
From consultation to solution implementation, MICI works closely with clients through every step of expanding into overseas markets, helping them break into the global market from 0 to 1. By assisting clients in developing, refining, and executing their international expansion strategies, MICI provides a superior localization experience for businesses entering Southeast Asia.
