China, 24th Nov 2023 – On October 18th, the Third Belt and Road Forum for International Cooperation was held in Beijing. Since the inception of the ‘Belt and Road’ initiative in 2013, Chinese companies have rapidly expanded overseas, capitalizing on this opportunity to drive global economic growth over the past decade. During this period, trade between China and ‘Belt and Road’ countries reached $19.1 trillion, with an average annual growth rate of 6.4%. Southeast Asia, in particular, has emerged as a key destination for corporate investments. Amidst the vast market opportunities, there is a growing concern about the participation methods and effectiveness of Chinese enterprises.
Benefiting from the ‘Belt and Road’ Initiative, China’s infrastructure business is venturing abroad.
Thanks to the ‘Belt and Road’ initiative, China’s infrastructure exports and co-operation has made significant progress over the past decade. According to data from the Ministry of Commerce, from 2013 to 2022, the newly signed contract value for Chinese projects in ‘Belt and Road’ countries increased from $71.5 billion to $129.6 billion. In the first eight months of 2023, Chinese enterprises have signed new construction contracts worth 725.35 billion yuan with participating ‘Belt and Road’ countries, marking a year-on-year increase of 5.6% and maintaining robust growth in infrastructure cooperation.
The surge in infrastructure investment has fueled demand for overseas machinery, construction materials, and architectural decorations, injecting fresh growth momentum into Chinese enterprises. According to a report from the Zhejiang Merchants Securities Research Institute, building materials companies have seen a remarkable growth rate of 46% and 25% in their overseas business. With the ongoing expansion of ‘Belt and Road’ market demand, the market potential for infrastructure-related industries continues to widen.
Southeast Asia Emerges as a Thriving Hub for Development
In several ‘Belt and Road’ regions, Southeast Asia has witnessed a notable surge in infrastructure demand as the pandemic subsided. This growth can be attributed to the realignment of global supply chains, sustained economic momentum, and robust support from top-level policies and funds.
Southeast Asian countries boast a sizable and expanding working-age population, offering a strong foundation of abundant and cost-effective labor resources for manufacturing development. Additionally, these nations are continually enhancing their business environments, making Southeast Asian economies a prominent market of interest for international investors and contractors.
The shift in manufacturing is accelerating exports, placing increased demands on the transportation infrastructure, including railways, roads, airports, and ports in Southeast Asian countries.
At the same time, several Southeast Asian countries have initiated substantial infrastructure investment plans to support the development of infrastructure projects. For instance, the Indonesian government has explicitly prioritized infrastructure construction with a planned funding allocation of up to $450 billion. The Philippines has announced its intention to maintain annual infrastructure spending at 5%-6% of the country’s GDP. In Malaysia, the government has allocated a budget of $20.43 billion for infrastructure development in 2023, encompassing 7,615 development projects, marking a 25.7% increase compared to 2022.
Driven by various factors, the opportunity for infrastructure development in Southeast Asian countries has expanded significantly. Southeast Asian economies are now not only among the world’s most promising regions for growth but also a thriving hub for the infrastructure construction industry.
Seizing Development Opportunities and Accelerating Localization for Market Capture.
As a vital building material in real estate and infrastructure, plastic piping is experiencing positive growth with the recovery of overseas market investments.
As the world’s largest plastic pipe manufacturer, LESSO has adopted a market-compatible and sustainable approach to its overseas market expansion. This journey began in 2007 with global trade, followed by brand partnerships, enterprise acquisitions, and the establishment of overseas factories. LESSO initially entered the North American market and later expanded its presence in Southeast Asia.
In recent years, LESSO has refined its globalization strategy by adopting a ‘localization’ approach. This involves establishing production facilities in key regions like Southeast Asia. This strategy not only leverages lower local labor and raw material costs to reduce production expenses but also minimizes trade barriers and logistics costs. It allows us to better align with the demands of the Southeast Asian market.
At present, LESSO has set up production facilities in countries such as Indonesia, Thailand, Malaysia, Cambodia, and others, alongside sales centers in 11 countries and regions. The ‘localization’ strategy has allowed LESSO to navigate global supply chain disruptions more effectively during the pandemic, sustaining robust growth. In 2021-2022, LESSO’s overseas revenue continued to surge, contributing to 7.5% of its total income. In 2022, LESSO’s international sales volume represented 13.8% of the national export total.
In 2022, LESSO’s production facility in Indonesia was put into operation, and its base in Cambodia is also up and running. Additionally, several production base projects are currently under construction in Thailand, Malaysia, and the Philippines.
Over the past decade, LESSO has played a pivotal role in Southeast Asia’s urbanization and industrialization, introducing Chinese expertise and solutions to the local construction sector. As we look to the future and the ongoing ‘Belt and Road’ initiative, LESSO’s localization strategy positions it for significant growth opportunities in Southeast Asia’s emerging markets.
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