Southeast Asia the new focus of Chinese tech firms
Matteo Giovannini
Customers shops at Surabaya, Indonesia, June 16, 2020. /VCG

Customers shops at Surabaya, Indonesia, June 16, 2020. /VCG

Editor's note: Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development. The article reflects the author's opinions, and not necessarily the views of CGTN. 

The outbreak of pandemic that has severely affected the whole world and has also resulted in a high degree of global disruption from trade to migration, which has almost wiped out entire decades of economic growth accomplished through the globalization.  

This has forced every nation and the related companies to make an effort to rethink their internationalization strategies, previously oriented to overseas investments, and to scale back to a more regional dimension through an increase in economic, political and humanitarian cooperation among countries that belong to the same area of the world.

Chinese tech companies have emerged among the most receptive in rethinking their international aspirations in part because they are pushed by the necessity to stifle a fierce domestic competition and in part to seize opportunities available in nearby growing markets whose digital economy has surged exponentially.  

In this context, the Southeast Asia has immediately become the center of attention for Chinese tech giants. The digital economy in this region is predicted to triple its size to 300 billion U.S. dollars in the next five years. It is therefore not surprising that three of China's largest tech firms are now committing substantial investments in the region in the scale of billions of dollars. 

Sandy Saputra, 19, who is one of TikTok's biggest Indonesian stars, uses his smartphone to record a video using the app in Jakarta, Indonesia, July 24, 2020. /VCG

Sandy Saputra, 19, who is one of TikTok's biggest Indonesian stars, uses his smartphone to record a video using the app in Jakarta, Indonesia, July 24, 2020. /VCG

According to Caixin Global, Alibaba is rumored to be in talks to make a three billion U.S. dollars investment in Southeast Asian ride-hailing firm Grab to combine its delivery network with the already owned e-commerce platform Lazada, acquired for one billion U.S. dollars in 2016, in a move that would guarantee total control of the retail business in the region. 

Some critics could argue that these companies' initiatives can only be explained in terms of geopolitics as a consequence of a growing wave of hostility coming from the U.S. and India that has forced Chinese tech firms to a drastic change of focus and to rapidly build up their presence closer to home in order to avoid being subject to unilateral retaliations or to be entangled in local protectionism.  

The geopolitical environment has certainly become tougher for China in the West, but there are deeper strategic motivations ranging from geographical proximity, to mobile-centric business models, to the level of maturity of the markets, that can explain why Chinese companies have now an incentive in investing huge resources in the Southeast Asia region.  

Southeast Asia represents today one of the regions with the highest grade of diversity and it is experiencing an unstoppable digital transformation driven by an increasing level of disposable income, a vibrant start-up ecosystem, a 650 million increasingly smartphone-savvy population, a booming internet economy and the availability of very cheap mobile devices.   

The geographical proximity also plays an important role as demonstrated by the recent decision of Chinese tech giants to expand their business presence in Singapore. It is a place that has for long time been considered an innovation hub due to its comparative advantage in the tech industry and to a local government that is very supportive in investing in digital transformation.  

The mobile-centric business model represents one the best example of similarities and possible integration between China and Southeast Asia due to the role that smartphones occupy in almost every activity of people's daily life and this could offer ample opportunities for Chinese tech companies in terms of synergies, especially in the e-commerce and mobile payments segments, and by exporting the extraordinary power of China's corporate mega app ecosystems such as WeChat, Didi or Meituan. 

Lastly, the level of maturity of the digital market of Southeast Asia is considered at a much lower stage in terms of penetration and development of technologies if compared to China, a market that has already reached the level of saturation, and this offers ample margin of expansion for the influx of Chinese money through direct investment of tech firms and venture capitals. 

The role of Southeast Asia has rapidly become more and more important for the future development of China's tech industry and, due to similarities in history, culture and tradition, the region is set to become a strategic ally for the growing influence of Chinese tech firms on the global stage.  

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