StanChart sees China-Asean growth accelerating as ‘China Plus N’ strategy takes hold

[SINGAPORE] Standard Chartered (StanChart) expects growth in its China-Asean business to accelerate over the next three years, as more Chinese companies continue to deepen their presence in South-east Asia.

This follows strong growth in recent years, with the lender’s income from its China-Asean corridor rising at a compound annual growth rate of 25 per cent between 2022 and 2025, making it one of the bank’s fastest-growing China corridors.

Growth over the next three years is likely to outpace the previous period, said Chow Wan Thonh, its head of coverage for Singapore and Asean.

“We are pretty confident that this will continue to be a major growth engine for us,” she told The Business Times in a recent interview.

The growth spans the bank’s business across the corridor, including areas such as liquidity management, foreign exchange, financing and advisory.

One area gaining traction is the broader use of the renminbi between China and Asean.

Cross-border renminbi settlement volumes between China and Asean increased by 35 per cent in 2024, as use of the currency broadened beyond trade settlement.

The growth comes as Beijing has been pushing for wider international use of the renminbi, including in cross-border payments, investment and financing.

On its end, StanChart is seeing growing client interest in renminbi for payments, liquidity management, foreign exchange and hedging, working-capital financing and longer-term funding.

For instance, the lender recently completed a syndicated loan for an industrial company operating in an Asean market that included both US dollar and renminbi tranches, though it did not disclose further details, citing client confidentiality.

From “China Plus One” to “China Plus N”

The rise in renminbi activity comes as Chinese companies rethink how they organise their regional operations.

Where investments in Asean were once driven largely by lower costs or access to raw materials, companies are now placing greater emphasis on building more resilient supply chains across several markets, Chow said.

“I think we have gone beyond ‘China Plus One’ now,” she said, referring to the strategy of retaining operations in China while adding production or investment in at least one other country to diversify supply-chain and geopolitical risks.

Companies are instead moving towards what Chow described as a “China Plus N” approach, with operations spread across several Asean markets rather than a single alternative production base outside China. (* See amendment note)

Geopolitical tensions and trade disruptions have strengthened the case for spreading production and supply chains across several markets, she said. Different Asean economies are also developing specialised roles within these networks.

Indonesia has attracted investment in mineral refining and processing for the electric-vehicle value chain, while Thailand is building on its automotive base as Chinese EV manufacturers and their suppliers expand there.

Malaysia, meanwhile, is moving into higher-value semiconductor and advanced manufacturing activities, alongside growing data-centre investment.

As Chinese companies expand across multiple Asean markets, Singapore is increasingly being used as a regional headquarters to coordinate functions such as treasury, financing, foreign exchange management and compliance, Chow said.

Some companies are also using Singapore as a base for investments outside the region, while others have established artificial intelligence laboratories or R&D centres here, supported by the Republic’s regulatory environment and talent pool.

Singapore has retained this role despite its relatively higher operating costs, she added, helped by its position as a neutral regional hub and its capabilities in areas such as finance and fintech.

“When they look at expanding into Asean as the region, that’s when Singapore will continue to be able to play a very meaningful role,” she said.

Asean increasingly an end-market

Despite policy uncertainty and short-term volatility in individual Asean markets, StanChart has not seen Chinese clients change their longer-term investment plans, Chow said.

Companies are looking at South-east Asia not just as an alternative manufacturing base, but also increasingly as a consumer market in its own right.

With a population of close to 700 million and a growing middle-income segment, the region is attracting Chinese consumer companies seeking to sell directly into its individual markets.

Recent geopolitical and energy-market volatility has reinforced the push to diversify production across multiple locations, she added.

“From our conversation with the clients, that has not changed,” she said. “It just tells them that it is increasingly becoming more important for them to not have reliance on a single market or a single area.”

Chinese companies are also looking beyond low-cost manufacturing when choosing South-east Asian partners, Chow said.

“Gone are the days whereby they are looking for low-cost production,” she added. “They are really looking for partners that could really support them in building a resilient supply chain.”

* Amendment note: An earlier version of this article referred to “China Plus Many” in the headline and text, based on the recorded interview transcript. StanChart subsequently clarified that the term used should be “China Plus N”.