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ASEAN's Economic ties with China Reduces Possibilities of Military Conflicts

Midea
2011-09-30 12:28 2877

HO CHI MINH CITY, Sept. 30, 2011 /PRNewswire-Asia/ --

The economic relation between China and the ASEAN is very close despite the territorial disputes in the South China Sea.

The establishment of the China and ASEAN Free Trade Area creates the world's largest free trade area that comprises developed countries and has 1.9 billion consumers, a GDP of nearly US$6 trillion and foreign trade totaling US$4.5 trillion. Huge growth potential and market space, geographical and cultural advantages as well as the current status of the Chinese in the ASEAN have together spurred Chinese firms' enthusiasm to directly invest in the region.

Just taking the household electrical appliance industry for example, China's Midea Electric Appliances, which has already established two plants in the ASEAN region, is planning to invest several millions of US dollars to build the third production facility in the region. After several years of development, Midea has become the largest fanner supplier in the region, where the company is very competitive in the market segment for small household electrical appliances, such as induction cookers and rice cookers. Chinese firms, represented by Midea and Haier, are changing the impression among local consumers that "China-made" is equivalent to low quality.

The participation of Chinese companies has changed the existing pattern, and competition has made the market more vigorous. A few years ago, the home appliance market in Vietnam was dominated by Japanese and South Korean brands, which were content with high profits and neglected the development of middle- and low-end markets as there was no pressure from competition. The entry of Chinese brands, represented by Midea, has led to an overall price decline, improving the affordability for middle- and low-income households and truly making the market a bigger one.

In addition to creating employment opportunities by making direct investment in ASEAN, Chinese companies including Midea have also supported the home appliance industry chain locally and built a pool of specialized talent. Midea alone has directly or indirectly provided 5,000 jobs in Vietnam. In order to reduce costs, Chinese companies have gradually put in place a localization policy by giving priority to local suppliers for raw material purchases and increasing their efforts to develop R&D and marketing businesses locally with the establishment of dedicated technical and marketing forces. By creating a large number of jobs and striving to accommodate the needs of local markets, Chinese companies are welcomed by local governments, give employees more sense of belonging and receive greater recognition from consumers.

The ambitious but warm corporate culture of Chinese companies is clearly more suitable for local markets, as the regional economy gets a second boost. As the European and U.S. economies are getting pummeled today, the rapid development of the China and ASEAN Free Trade Area becomes extremely impressive. Despite the territorial disputes in South China Sea, it is important to see that China and ASEAN have many areas of common interest in their economic relationship, significantly reducing the possibilities of military conflicts.

Source: Midea
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