Doing Business in Asia: Current Trends, Challenges and Opportunities

Since the European de-risking strategy at the latest, Asia’s role in international trade has been called into question. While more and more businesses are striving for diversification of their investments in the region, others, especially the multinationals with long-standing business relationships in China, continue to invest diligently in their production facilities on site.

The general question is not whether investments will stop abruptly, but where precisely they will flow to within the region. Just imagine a potential relocation of a production plant from China to Vietnam, India or Malaysia. This decision requires a lot of financial resources, time, on-the-job training for current staff, new hiring of local experts, legal challenges and not to forget the implications for the supply chain.

Of course, there are other interesting markets besides China in the region: India is booming and according to the World Economic Forum already a “significant economic and geopolitical power.” Moreover, some “niche markets” like Malaysia or Cambodia are worth to give a second glance. Asia with its more than 4.5 billion population does not exist as a homogeneous continent: Each state has its own specific characteristics that need to be addressed. It’s not the same doing business in South Korea, as doing business in Japan or the Philippines. The countries differ significantly, for example due to their geographical location, different purchasing power, differently developed industries, and cultural characteristics.

Facts about Asia:

  • More than 50% of Asian trade occurred within the region in 2021 (WTO)
  • Home of approximately 60% of the world population (Statista)
  • The region comprises more than 45 countries, including such giants as China or India
  • In accordance with the WTO, Asia accounted for approximately 35% of the World’s Exports (in goods) and more or less 43% of the World’s imports (in goods) in 2021

As you can see, Asia offers great variety within the continent, which can be very challenging for companies and foreign investors.

Some of these challenges include the following factors:

  • Cultural differences: Language barriers, communication styles, understanding and adapting to local cultures, among others
  • Legal & regulatory complexities: Varying legal frameworks, regulations and bureaucratic processes
  • Selecting an adequate market entry strategy: Identifying the right target market, business partner or distribution channels

When we talk about challenges on the one hand, it cannot be denied that there exist also vast opportunities for companies and investors doing business in Asia. Why else would German multinationals like VW, Bosch or BASF, just to name a few, invest into their existing production plants or set up new R&D centers in the region.

Opportunities doing business in Asia

  • Fast-growing consumer class: 113M people in the region will enter the global consumer class in 2024 (World Data Lab)
  • Shift in global purchasing power: According to a forecast of the Standard Chartered multinational bank, China’s purchasing power is estimated to almost triple by the end of 2030 and India’s purchasing power to almost quintuple within the same time period
  • Fast-growing industries: Gaming, E-commerce, food and beverage, delivery and logistics
  • RCEP FTA: The Regional Comprehensive Economic Partnership represents the world’s largest free trade area, giving access to more than 2 billion consumers

In addition to the above-mentioned existing opportunities, there are also extra reasons why companies should take a closer look at Asia, not neglecting this diverse target market by leaving it to the competition.

Reasons, why companies should (still) invest in Asia

  • Cost advantages in terms of production/ manufacturing or outsourcing solutions
  • Global leader in innovation and technology: Apart from the United States, Asia is the most important key player in terms of innovation and cutting-edge technology
  • Skilled labor talents working for highly competitive wages
  • Diversification, reducing dependency on other markets (e.g., European and North American countries)

If you are not convinced yet of your market expansion to Asia, the first-hand insights from Dutch entrepreneur Charles Drapers should arouse your interest. Charles is the owner of WILLEX bike accessories and rainwear in Hong Kong and has been doing business successfully for more than 30 years in the region as a Hong Kong resident.

For more detailed insights check out the record of our webinar from March 18

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