China’s reopening and engagement with partners can benefit Asean: economists

CHINA has the potential to rebuild ties with its major trading and investment partners; and the appointment of a “business-friendly premier” has helped to boost the country’s global image, said OCBC Bank’s chief economist Selena Ling at an event on Thursday (Apr 13).

Ling, who was one of four speakers at the British Chamber of Commerce’s annual Economic Briefing, was responding to a question about what Chinese policymakers are trying to achieve economically and their top goals when hosting other countries.

“It’s twofold. First, there’s a lot of talk about China needing to improve its image in the soft power aspect. Second, geopolitics has a real impact on economics. It’s not just about trade, but also investment and talent flow,” she said.

“A China that is thriving is always good for this part of the world,” she added.

Data from China’s General Administration of Customs showed that Asean remained China’s largest trading partner in the first two months of 2023. China’s trade with Asean increased 9.6 per cent year-on-year to 951.9 billion yuan (S$183.3 billion), accounting for 15.4 per cent of the country’s total.

China’s direct investment in Asean continued to focus on manufacturing with its share reaching nearly 30 per cent of stock in 2021, she added.

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Singapore remains the “favoured country” within Asean by Chinese investors, followed by Indonesia and Vietnam, said Ling.

During the dialogue, she also commented on the recent appointment of former Shanghai party chief Li Qiang as the country’s new premier.

“Premier Li’s down-to-earth approach suggests he may be the most business-friendly premier,” said Ling.

Li has pledged that China – the world’s second-largest economy – will continue to roll out measures to increase market access and improve the business environment for both state-owned and private companies, as well as foreign businesses.

Another panellist at the discussion, Maybank’s chief economist Chua Hak Bin, pointed out that China’s reopening will help drive global growth, with South-east Asian countries such as Thailand, Cambodia and Vietnam “very dependent” on tourists from China.

In his opening presentation, Dr Chua shared that in February this year, Chinese tourists to Asean were at 15.5 per cent of pre-pandemic levels.

Chidu Narayanan, Asia FX and rates strategist at BNP Paribas, noted that while there was an expectation by many markets that China would reopen as early as March 2022, these expectations have “tapered down quite a bit” because they have not seen a “pick-up in Chinese tourism” yet.

He reckons it will take a while for Chinese tourists to return in droves because it has been a long time since many have travelled abroad, and their passports may have expired.

“Anecdotally, people would need to queue six to nine hours at the embassy and after, they would need to apply for a visa, which might take a long time depending on where they are applying to,” he said.

Alex Holmes, a senior economist at Oxford Economics, was asked for his views on how Asean economies could benefit from working more closely with the UK, and the areas where the UK could further cement its economic role in the region.

“The UK is a service export powerhouse, and is very strong in professional services, finance, and increasingly in areas such as tech and green finance,” he said.

Weighing in, OCBC’s Ling said that e-commerce and digital services will continue to grow rapidly in the coming years.

“I think generally in terms of professional services, there is a huge room for growth. As Asean economies mature and industrialise, there will be a lot of demand for such services,” she said.