Driven by diplomacy and its quenchless thirst for energy and raw materials, Chinese investment into South-East Asia has gone from a trickle to a flow in recent years although it remains miniscule when compared with that of the United States, Japan and Europe.
In the 10-country Association of South-East Asian Nations (ASEAN), there are signs that Chinese investment is "just under way" after suffering some early failures, said Wang Qin, an expert on South-East Asia at China's Xiamen University.
"Actually, in the early period of Chinese firms investing in South-East Asia, there were many failures," Wang said, "but in recent years, they have developed quickly, especially some large companies which have competitive advantages."
China has become a leading foreign investor in Cambodia, Laos and Myanmar, ASEAN's least developed economies, and this year has taken the lead in investment applications in Thailand.
The ruling Communist Party began in 1999 to encourage investment overseas by successful state firms that grew rapidly during the country's economic reforms.
It has used diplomacy to promote its "win-win" view of investment projects and timed its drive with the removal of barriers upon China's entry into the World Trade Organization in 2001.
More than 10,000 Chinese companies invested a total of 73.3 billion dollars in about 160 countries by the end of 2006, Deputy Commerce Minister Wei Jianguo said at an investment conference last month.
Direct investment overseas shot up 21 per cent in the first half of this year, compared with the same period a year earlier, to 7.8 billion dollars after reaching more than 16 billion dollars in the whole of last year and 12.3 billion dollars in 2005.
Zhou Xiaochuan, the governor of China's central bank, last month promised to remove controls on foreign exchange, simplify procedures for companies investing abroad, and encourage firms to raise capital through bank loans, public share issues and bond sales.
The government estimated that Chinese investment has already created about 200,000 jobs in other countries.
More than 90 per cent of China's investment has gone to Asia and Latin America so far, and ASEAN nations remain some of the top targets for Chinese firms.
ASEAN - which consists of Singapore, Thailand, Malaysia, Indonesia, the Philippines, Brunei, Laos, Cambodia, Vietnam and Myanmar - is seen as relatively safe "because in some undeveloped countries, the situation and policy are not so stable, so there is greater risk," Wang said.
"ASEAN countries are the key areas for Chinese companies to develop abroad because of the proximity and the presence of many people of Chinese origin, making the cultures there comparatively receptive," he said.
But even in ASEAN, the scale of Chinese investment remained small and there are "not many successful and large-scale Chinese companies," Wang added.
ASEAN Secretary General Ong Keng Yong last year urged China to spread the benefits of its vast manufacturing industries by investing in the region.
Ong suggested that Chinese auto firms should invest in component plants in ASEAN nations for final assembly in China and then export completed vehicles to ASEAN countries, thus helping to reduce the region's trade deficit with China.
With an increasingly competitive domestic market, some Chinese auto producers aim to increase their market share by undercutting the prices of the Japanese firms already established in ASEAN.
"Cooperation in the auto industry between China and ASEAN will bring a win-win situation for the two sides and make their cars more competitive in the international market," state media quoted Gu Xiangdong, deputy secretary general of the China Association of Automobile Manufacturers, as saying in November.
Free-trade agreements within ASEAN and between ASEAN and China could also allow Chinese firms to produce vehicles in South-East Asia and export them more cheaply than they would be able to do from China.
Individual ASEAN nations also offer advantages for China, such as the lower labour costs in Vietnam, Wang said.
Despite the government support, the short-term prospects are not all rosy for the Chinese auto firms.
"There is still a great gap between the technology level of Japanese firms and that of Chinese enterprises," Wang said.
He forecast that it would take Chinese auto firms at least five to 10 years to catch up with the Japanese and other international producers in South-East Asia.
"The multinationals in the auto industry have established their systems in the South-East Asian countries," Wang said.
"They make use of the low labour costs and favourable [investment] policies of local areas," he said, "so I think Chinese companies may not have many advantages in competing with them."
In the 10-country Association of South-East Asian Nations (ASEAN), there are signs that Chinese investment is "just under way" after suffering some early failures, said Wang Qin, an expert on South-East Asia at China's Xiamen University.
"Actually, in the early period of Chinese firms investing in South-East Asia, there were many failures," Wang said, "but in recent years, they have developed quickly, especially some large companies which have competitive advantages."
China has become a leading foreign investor in Cambodia, Laos and Myanmar, ASEAN's least developed economies, and this year has taken the lead in investment applications in Thailand.
The ruling Communist Party began in 1999 to encourage investment overseas by successful state firms that grew rapidly during the country's economic reforms.
It has used diplomacy to promote its "win-win" view of investment projects and timed its drive with the removal of barriers upon China's entry into the World Trade Organization in 2001.
More than 10,000 Chinese companies invested a total of 73.3 billion dollars in about 160 countries by the end of 2006, Deputy Commerce Minister Wei Jianguo said at an investment conference last month.
Direct investment overseas shot up 21 per cent in the first half of this year, compared with the same period a year earlier, to 7.8 billion dollars after reaching more than 16 billion dollars in the whole of last year and 12.3 billion dollars in 2005.
Zhou Xiaochuan, the governor of China's central bank, last month promised to remove controls on foreign exchange, simplify procedures for companies investing abroad, and encourage firms to raise capital through bank loans, public share issues and bond sales.
The government estimated that Chinese investment has already created about 200,000 jobs in other countries.
More than 90 per cent of China's investment has gone to Asia and Latin America so far, and ASEAN nations remain some of the top targets for Chinese firms.
ASEAN - which consists of Singapore, Thailand, Malaysia, Indonesia, the Philippines, Brunei, Laos, Cambodia, Vietnam and Myanmar - is seen as relatively safe "because in some undeveloped countries, the situation and policy are not so stable, so there is greater risk," Wang said.
"ASEAN countries are the key areas for Chinese companies to develop abroad because of the proximity and the presence of many people of Chinese origin, making the cultures there comparatively receptive," he said.
But even in ASEAN, the scale of Chinese investment remained small and there are "not many successful and large-scale Chinese companies," Wang added.
ASEAN Secretary General Ong Keng Yong last year urged China to spread the benefits of its vast manufacturing industries by investing in the region.
Ong suggested that Chinese auto firms should invest in component plants in ASEAN nations for final assembly in China and then export completed vehicles to ASEAN countries, thus helping to reduce the region's trade deficit with China.
With an increasingly competitive domestic market, some Chinese auto producers aim to increase their market share by undercutting the prices of the Japanese firms already established in ASEAN.
"Cooperation in the auto industry between China and ASEAN will bring a win-win situation for the two sides and make their cars more competitive in the international market," state media quoted Gu Xiangdong, deputy secretary general of the China Association of Automobile Manufacturers, as saying in November.
Free-trade agreements within ASEAN and between ASEAN and China could also allow Chinese firms to produce vehicles in South-East Asia and export them more cheaply than they would be able to do from China.
Individual ASEAN nations also offer advantages for China, such as the lower labour costs in Vietnam, Wang said.
Despite the government support, the short-term prospects are not all rosy for the Chinese auto firms.
"There is still a great gap between the technology level of Japanese firms and that of Chinese enterprises," Wang said.
He forecast that it would take Chinese auto firms at least five to 10 years to catch up with the Japanese and other international producers in South-East Asia.
"The multinationals in the auto industry have established their systems in the South-East Asian countries," Wang said.
"They make use of the low labour costs and favourable [investment] policies of local areas," he said, "so I think Chinese companies may not have many advantages in competing with them."
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