China, a major exporter, represents an extremely lucrative market for European companies and an economically and technologically attractive market throughout the Asia-Pacific.
1. A crowded and growing market
The Asia-Pacific region has a population of 4.3 billion, or 60% of the world’s population. With a population of 1.4 billion, China is not only the most populous country in the world, but also the world’s second largest economy, and it is growing. The Chinese population is increasing its standard of living, and by 2030 it is predicted that China’s middle class, which is the world’s largest, will account for a quarter of global consumption.
The whole Asia-Pacific is a market of huge potential. The Southeast Asia region is particularly attractive, with a GDP of 0 3.080 billion by 2020, a sharp increase from previous years. The forecast is that the region will become the world’s fourth largest economy by 2030.
2. A technology-intelligent population
For many years, technology has been an integral part of people’s lives in the Asia-Pacific region. The Japanese and South Koreans in particular are famous for their innovations and extensive use of modern technology. The Southeast Asian region is the fastest growing internet market in the world with 125,000 new users every day. China has certainly become the most technology-conscious country, with most of the global e-commerce sales taking place there. About two-thirds of the population (about one billion people) use a smartphone, and more than a third pay for their purchases from WeChat Pay or Alipay, the country’s main online payment platform. A report by the World Economic Forum puts China at the top of the global digital competition rankings, with a strong lead (Indonesia is also in the top 10). Its technology-intelligent character is an important factor in the economic development of the country.
The government is committed to digitizing Chinese industry through its “Made in China 2025” plan, which aims to modernize and make it more resilient. In the south of the country, in the Guiyang region (贵阳), for example, more than 85% of local factories use cloud technology.
3. The world’s largest 5G network
All technological developments depend on a digital infrastructure. Connections should be fast, stable and of good quality If Europe is one of the leaders in the development of 5G, it is a long way off. If the trend is confirmed, by 2026 5G will represent only 35% of the networks used in Europe.
Chinese companies, far from these concerns, have 1,425,000 5G stations spread across the country, or 70% of the stations installed worldwide. Even at the top of Mount Everest, trekkers enjoy uninterrupted 5G connectivity, thanks to the world’s tallest station set at 8,848 meters by China Telecom. China also has the lowest station at the Jinyuan Coal Mine in Shaanxi Province, 534 meters below the Earth’s surface.
The local industry is the first to benefit from this 5G infrastructure, as it forms the basis for creating fully digital and increasingly automated smart factories. For example, 100 concrete projects have already been planned and another 1000 will follow
Expansion of 5G continues in China, with coverage targets set for 2023. 560 million residents must have access to 5G network On the other hand, the Chinese government decided in March 2020 to invest 8 4.8 trillion not only in the installation of 5G, but also in the construction of new data centers, artificial intelligence and smart factories.
Other countries in Asia Pacific were not left out. For example, South Korea has set up the first 5G network, which will support 60% mobile connectivity by 2025. 5G is already available in 85 cities It is located in 24 cities in Thailand, as well as in France. In Southeast Asia, 5G is a matter of financing. By 2025, 200 million people will have access to 5G.
Singapore, which launched 5G in 2020, is the first country in the Southeast Asian region to develop 5G. Its goal is to cover the entire region by 2025. Vietnam, Thailand, Malaysia and the Philippines have similar goals.
4. Growing mixed economy
The role of industry varies greatly from country to country in Asia-Pacific and it is highly dependent on economic and socio-economic development. Like China, it has long been regarded as the world’s workshop, experiencing strong economic growth for the export of all kinds of mass-produced goods in the early 1990s. Between 2007 and 2017, this development resulted in a 60% increase in production costs in China.
That’s why the Chinese government has been promoting a new norm since 2014: a transition phase where economic growth is moderate at 6-7%. Although China is still a world leader in manufacturing and exports, the share of industry in GDP has been steadily declining over the past decade (the “Made in China 2025” plan is no coincidence). At the same time, the share of services has grown by more than 10% since 2010 and is now responsible for the lion’s share of GDP. In Beijing, the stock rose 83.1% in 2019.
This development is visible in other countries in the Asia-Pacific region. Most developed economies are focusing more on services while agriculture and industry are declining. Hong Kong and Singapore, for example, have developed their economies through industry but have gradually moved into the world of services. South Korea in a special case: Considered a developed country, the share of industry there is still very high in GDP. India, an emerging country, is developing on the same model as China. The service sector represents 53.89%, industry 25.92% and agriculture 20.19%. Other Southeast Asian countries such as Vietnam, Indonesia, Thailand and Malaysia are also shifting from industry-based to service-based economies, although it is slower than China and India, where industry is still responsible for the most part. Of GDP.
For foreign manufacturers, changing this direction in the Asia-Pacific region is a real opportunity. Smart technology, process automation and robotics can be competitive advantages. They not only help increase efficiency and productivity, but also help respect and optimize safety rules.
5. Advantages of foreign skills
Asia Pacific factories are highly specialized: electronics in Malaysia and Vietnam, automotive and packaged food in Thailand, machinery and petrochemicals in Indonesia, semiconductors in the Philippines, packaged food and equipment, and pharmaceuticals in Singapore. This lack of diversity could create problems for some countries in the future – especially in the face of global deficits and an unstable supply chain.
Because it wants to avoid finding itself in this delicate situation that China has decided on its “Made in China 2025” plan. However, although it has developed rapidly, there are still some flaws in the Chinese industry. Considered in the past for large-scale production, which was its strength, it now needs to re-focus on quality and durability. He is aware of this but the transition is slow. And compared to leading industries such as Germany, Japan and the United States, China lags behind in efficiency and structural optimization.
According to a 2017 survey, skilled workers have very few opportunities for development in China More than one third of the respondents regretted the lack of qualifications and skills One reason for this is that the study for the art profession in China is not in line with Western standards. Moreover, intellectual occupations are far more valuable than factory work, which does not attract qualified youth.
For European companies, this is an opportunity to hone their skills and position themselves in the Chinese market. Not only does China appreciate the quality of European industrial products, but China is also Europe’s largest trading partner. In 2020, 586 billion euros worth of goods were imported and exported, with trade between China and the European Union (EU) representing 16% of all EU commodity trade.
The EU is working hard to ensure healthy competition in China. For example, the Global Investment Agreement (GIA) negotiated with the country is the first step towards opening up the Chinese market to EU companies. The agreement provides, among other things, a ban on forced transfer of technology and an obligation for state-owned enterprises to adhere to market standards.
For all these reasons, Asia Pacific is a high-potential market for European companies. The world’s largest market, the technology-savvy population, who love European science. In addition, the conditions are met allowing European companies to find a place for themselves, seeking economic diversification. From a technical point of view, 5G facilitates exchange and connectivity with suppliers and partners.