China is 'Asian firms' top choice for expanding regionally'

As China enjoys strong growth in middle-class households, the increased spending power of its middle class is targeted by firms in the food and beverage, tourism, leisure and travel service sectors in particular.
As China enjoys strong growth in middle-class households, the increased spending power of its middle class is targeted by firms in the food and beverage, tourism, leisure and travel service sectors in particular.PHOTO: AGENCE FRANCE-PRESSE

UOB survey finds 32% favour China, while 24% pick Singapore

China is the top choice of Asian enterprises looking to expand regionally but Singapore is not too far behind, a new survey has found.

Nearly one-third of respondents, or 32 per cent, named mainland China, according to the survey by United Overseas Bank (UOB).

Singapore appealed to nearly one in four, or 24 per cent, said the UOB Asian Enterprise Survey 2014, released yesterday.

Other choices included Malaysia, cited by 27 per cent, and Vietnam with 24 per cent.

Respondents were asked to list all the countries that they thought to be suitable for regional expansion.

UOB said markets such as Singapore, China, Malaysia and Vietnam are enjoying strong growth in middle-class households.

UOB polled 1,024 Asian enterprises across six markets including mainland China, Hong Kong, and Indonesia, in February and March, to examine their views of challenges and opportunities in the region, as well as their plans for growth.

The survey found that companies in the food and beverage, tourism, leisure and travel service sectors in particular are targeting the increased spending power of the middle class.

Another key motive for Asian companies on the move is to expand into lower-cost markets.

Mr Frederick Chin, head of group wholesale banking at UOB, said the survey "reaffirmed that rising incomes create opportunities for those businesses that can cater to the higher expectations and consumption patterns that come with increased affluence".

He added that firms able to cater to the growing demand can "tap into a closely integrated and increasingly interconnected Asia for abundant and sustainable growth opportunities".

The survey also found that relationships play a key role when it comes to selecting a new business location.

Those who preferred to seek advice from personal and business contacts with a similar language or culture made up 24 per cent.

One in five, or 20 per cent, said they would rather speak to trade associations and financial advisers about decisions on when and how to expand regionally, the survey found.

However, rising costs in the region are the major reason limiting growth, according to more than one-fifth, or 22 per cent, of those surveyed.

A shortage of labour was also a hurdle in regionalisation plans for 15 per cent of respondents.

Those in the manufacturing sector are looking to set up facilities in cheaper markets such as Vietnam and Myanmar, it found.

The survey also looked at the plans of Chinese enterprises to expand within the mainland.

A total of 40 per cent of Chinese enterprises said they may move from hot spots in the Pearl River Delta and the Yangtze River Delta, where costs are rising, to emerging consumer markets in lower-cost areas in south-western and central China such as Nanning, Chongqing and Chengdu.

UOB senior economist Suan Teck Kin said: "Production and labour costs in developed cities in China and Singapore are inching upwards."

He added that the move to lower-cost cities in China or less expensive markets "allows businesses to trim their costs and remain connected to Asia's large middle-class consumer base".

rachaelb@sph.com.sg