What’s next for China’s tech investment in the Asean region?

Among this, China’s tech giants have caught the lion’s share of the headlines with the likes of Alibaba and Tencent Holdings entering the region, and JD.com investing in Thai online fashion brand Pomelo.
That China has begun to increasingly invest in Southeast Asia’s technology should not come as a surprise, given the commercial and manufacturing potential that Southeast Asia offers.
With more than half of Asean’s 650 million citizens younger than 30, its young and tech-savvy consumer base is open to trying – and buying – new things, preferably online or via mobile devices. Indeed, according to a Google/Temasek report, Asean’s digital economy is projected to exceed US$200 billion (Bt6.3 trillion) by 2025 and many Chinese companies are looking to capitalise on this potential.
On the manufacturing side, Asean has been perceived as a strong production option for multinationals given its role within existing supply chains, growing consumer base and strong trade and investment ties.
The rapid and all-consuming nature of digital and technology means that nearly all sectors are considered technology plays and opportunities – from medical to education to traffic. The sectors are only going to widen into areas like construction, real estate and logistics, 
So, if 2017 and 2018 have been the breakthrough years, what’s next for China’s tech investment into the region?
An interesting space to look out for will be investment in tier-two tech players in Southeast Asia.
China is among the top three countries for venture capital investment in digital technologies, and Asean remains relatively under-represented in terms of startups, so the potential to scale up is huge. This is starting to happen with the likes of Malaysia-based Glueck Technologies – which develops sophisticated AI – and Singaporean e-grocery site RedMart – having both received substantial investment from mainland investors. 
Another avenue could be Asean’s Smart Cities Network, which aims to use technology to improve urban planning in areas like transport management and other utilities across 27 Asean cities. With more than 500 smart city projects underway, China has the largest number of smart cities in the world and certainly has the experience to make a meaningful contribution. 
We’ve begun to see this already. In Malaysia, Kuala Lumpur signed an agreement in January 2018 with Alibaba’s cloud service, “City Brain”, to work on traffic management, town planning and incident response. In Thailand, Chachoengsao province is likely to host the smart city for the smart infrastructure development in the Eastern Economic Corridor (EEC) in collaboration with China and Japan. The government plans to further develop 30 smart city zones in 24 provinces this year and extend its target to 100 zones in 77 provinces by 2020.
A third area could be improving Asean countries’ ability in global supply chain sectors like electronics and automotive. Chinese businesses want to see Southeast Asia position itself as a viable alternative for lower-end production, but the region cannot expect a wide-scale widening of supply chains to the region unless production technology and capacity increase. A clear example is Chinese carmaker Geely being able to drastically cut production costs at Malaysian carmaker Proton through technology transfer. 
Asean’s urbanisation, digital adoption and consumer growth make it an attractive investment destination. However, its geographic diversity, ease of business and different foreign investment laws can sometimes make it a tough nut to crack. Despite this, Chinese companies have signalled their intention to expand, and Asean seems keen to reciprocate. For example, driving the digital agenda is the focus of Thailand as part of its chairing of Asean in 2019.
The digital marketplace is both an opportunity and a challenge to businesses, as it brings both customers and competitors to corporate doorsteps. 
Investment and growth-hungry local companies are alive to the commercial opportunities spinning out of Asean’s burgeoning digital consumers as well seeing the potential of China’s tech companies as potential partners or investors.
But the competition for funds is heating up.
Attracting investment requires setting up the right environment, culture, and mindset within the company to be actively seeking technology disruption before it gets thrown upon you. More specifically, this means adopting an open and digital-first mindset to engage the tech community, encouraging innovation and being open to new ideas. It also requires an openness to see investors as partners who can drive a business to higher levels of growth and performance.
For many companies, beefing up their technology credentials will not be a straight-line process nor will it be without its challenges, but it is important to start making the shift now to capitalise on these opportunities. After all, the digital arena – like time – waits for no one.

KELVIN TAN is the chief executive officer of HSBC Thailand.