China investment returns to Asean amid trade war

CHINESE investment is flowing into Asean once more, as projects under the Belt & Road Initiative (BRI) see a recovery and ongoing trade tensions with the United States are prompting Chinese companies to invest in parts of South-east Asia, Maybank Kim Eng noted in a report.

China's investments and construction contracts In Asean rebounded to US$11 billion for the first six months of 2019, double the amount in the six months prior, according to Maybank KE data. For the whole of 2018, investments hit US$22.4 billion, down from the peak of US$38.2 billion seen in 2017.

The recovery was largely led by Indonesia, Cambodia, Singapore & Vietnam, while revival of BRI projects in Malaysia is expected to boost Chinese investment in 2020, the report said.

Among them, Malaysia's 640-kilometre East Coast Rail Link, which was in danger of being scrapped, was revived in April and set to complete by 2026.

In all, Asean projects account for 35 per cent of all BRI projects between 2014 and 2018, with Malaysia taking up the largest share at 7.2 per cent, which is worth US$27.5 billion.

The report was prepared by Maybank KE economists Lee Ju Ye and Linda Liu and was presented at the Institute of Southeast Asian Studies' Regional Economic Studies Programme seminar.

They noted that China investments are driving a property and tourism boom in Cambodia, as real estate investment surged 53 per cent to $4.6 billion in the first seven months of 2019, compared to the same period last year.

The economists also pointed out that as China becomes a larger investor in the region, US and Japan too are working on more Indo-Pacific initatives, such as the US Development Finance Corporation and Japan's Partnership for Quality Infrastructure.

Asean could further gain from the fallout from the US-China trade war, as a survey showed that almost 25 per cent of US firms in China plan to relocate their manufacturing facilities to Asean as a result.

Maybank KE noted that China's investment in the US is "collapsing", hitting just US$3 billion in the first half of 2019. Investments have been on a decline after hitting a peak of US$55 billion in 2016.

Instead, China's tech investments in Asean are growing as "Chinese money is increasingly shunned in the West", the report said, adding that Singapore and Indonesia continue to secure the lion's share of such investments.