EARLIER in 2018, iPrice made three key predictions on the e-commerce landscape in Southeast Asia. With less than four months more till the end of 2018, we have witnessed the fulfillment of two out of three predictions.
One of the predictions was that China will increase its investments into Southeast Asia’s digital economy. This was evident through Alibaba’s involvement in the region’s digital economy.
In February 2018, Alibaba upped its stakes in Southeast Asian e-commerce company Lazada, with an additional MYR8 billion (US$1.94 billion) in investment.
Furthermore, the Chinese e-commerce giant appointed its veteran executive Lucy Peng as chief executive to accelerate its growth in Southeast Asia and deepen Lazada’s integration into the Alibaba ecosystem. Alibaba alone has invested a total of MYR16 billion (US$3.88 billion) into Lazada to date.
Chinese Billionaire and founder of Alibaba Jack Ma personally shook hands with the former Malaysian Prime Minister Najib early 2018, launching its first Digital Free Trade Zone (DFTZ) outside China.
This was a landmark announcement as it revealed that the e-fulfillment hub will extend across 24,700 acres (almost 10,000ha) and is expected to generate over MYR6 billion (US$1.45 billion) worth of foreign and domestic investment for Malaysia.
Why is China Interested in Southeast Asia’s Digital Economy?
But with such advanced technologies and flourishing population in its home country, one might wonder: What is so interesting in Southeast Asia that has made Chinese companies such as Alibaba pour in huge investments into the region?
Apart from the fact that Southeast Asia is geographically close to China, the region has presented huge potential in recent years with an untapped market of 600 million people and a growing middle class.
This is highly attractive, especially at a time when China’s economy is slowing down and Chinese giants (such as Alibaba) are sitting on piles of cash ready to spend on overseas growth.
Not to mention, Southeast Asia remains a relevant market for China as it is also home to the largest community of overseas Chinese. Recent figures indicate that there are over 25 million Chinese currently residing in the region.
Alibaba’s investment into the region is just the tip of the iceberg. We should expect to see more China-based companies pouring in investments in a bid to dominate Southeast Asia’s digital space.
Already with a grip on the region is Tencent who has heavily invested into Shopee (e-commerce), Tokopedia (online marketplace) and Go Jek (ride-hailing).
Other Chinese giants expecting to enter Southeast Asia could possibly be Baidu (search engine) and Didi Chuxing (transportation). This is highly advantageous for both businesses and consumers as greater access to attractive products and services will be made available to improve the quality of life for all.
This is an expert article by iPrice Group