With The Young SEAkers (TYS), the ASEAN Business Youth Association (ABYA) organised a webinar on China-ASEAN supply chains on 20 February 2021 as part of ABYA's 'A Future in ASEAN' monthly dialogue. Assistant Professor Sanjana Goswami from the Lee Kuan Yew School of Public Policy moderated the session alongside 2 esteemed panellists: Mr Low Yew Seng, the Director of Shanghai Apolo Medical Technology Co Ltd and Former Vice President of ST Engineering, as well as Mr Jeffrey Tan, Head of Group Corporate Development & Group Technology at YCH Group.
The recent implementation of the Regional Economic Comprehensive Partnership (RCEP) on 15 November 2020 marks a milestone in fostering closer business and economic ties between China and ASEAN, two of the most promising Asia Pacific economies. Integrated global value chains fostered by closer regional partnerships have brought abundant opportunities for companies and talents alike. In the session, the panellists shared major trends and opportunities in ASEAN-China business dynamics, challenges in this new era, and how youths can better equip themselves with the necessary skills and experiences.
Challenges in Global Value Chains and Processes
Prof Sanjana introduced the panellists and they shared their experiences through a macro perspective of their industries. Mr Tan noted the challenges in verifying cargo authenticity due to complex supply chains and differing cargo needs.
From Mr Low, participants learned that understanding the China Compulsory Certificate (CCC) and preferred list system can prevent potential supply chain and tax issues in China. The CCC mark is required for Chinese manufacturers and imported products to enter the Chinese market. Without the mark, products could be rejected, delayed, or quarantined by the Chinese authorities. The preferred list changes regularly, thus it is important to check updated lists to ensure that goods can be imported into China.
In addition, China utilises a dual court system for arbitration and execution. The execution court nearest to the supplier generally rules on awards meted out in arbitration, and participants were advised to sign contracts in Shanghai or Beijing for minor deals with the shorter duration for arbitration award judgements to be transferred to execution courts at these locations. Having arbitration held in Shanghai or Beijing also enables companies to leverage the legal representative blacklisting system more easily and enhance company protections.
Supply Chain Disruptions due to COVID-19
Prof Sanjana then asked the panellists how the pandemic had affected the supply chain industry. Mr Low shared his difficulties maintaining connections with clients due to the transition from physical to online communication platforms. Constraints faced by Chinese customs due to the pandemic have also resulted in decreases in shipment volumes, although the situation has improved since the fourth quarter of 2020.
Mr Tan shared that Singapore's advantage in its number of free trade agreements (FTA) allow for reductions in taxation and tariff burdens in ASEAN and China. He also highlighted pandemic impacts such as disruptions to goods flow between Singapore and Malaysia due to the imposition of the Movement Control Order (MCO). COVID-19 thus reinforces the importance of close relations between countries and diversification in the supply chain industry in allowing for essential goods to move between regions.
Growing Opportunities in the ASEAN region
The ongoing US-China trade war presents multinational corporations (MNCs) with an opportunity to shift operations to the ASEAN region. Prof Sanjana sought the panellists' perspectives on how ASEAN countries can benefit from the trade war. MNCs not operating in ASEAN face specific challenges, but companies like Mr Tan's help assist them in moving factories out of China. Mr Tan shared how the region's expanding opportunities reflect the importance of managing elements such as political stability, improving infrastructure and workforce to manage such supply chain complexities.
Despite challenges from the pandemic, China has recovered swiftly. Mr Low explained how China could maintain growth in sectors such as construction, while Mr Tan analysed the Chinese's entrepreneurial mindset and ability to swiftly deal with the pandemic by relying on the strategies such as dual-circulation to boost GDP through raising internal consumption.
Learning from challenges in ASEAN and China
Finally, Prof Sanjana asked panellists on their opinions about future trends and what youths should learn to succeed in the changing environment. Mr Low talked about emerging trends such as additive manufacturing and 3D machines, which reduces supply chain lapses. He added that product origin requirements have resulted in Chinese Small and Medium Enterprises (SMEs) importing raw materials from ASEAN countries. Due to aversion towards outsourcing, it is difficult convincing them to subcontract operations to local companies or to partially invest in production plants in the region. ASEAN countries thus need to develop more ways to attract support from Chinese companies by investing in infrastructure.
Mr Tan noted the RCEP provides more connectivity and movement choices for cargo flows and professionals in ASEAN and China. Youths could also be involved in more regional activities and business opportunities. However, this brings challenges as the playing field for youths across ASEAN is levelled. Therefore, they must innovate and adapt to market trends. Youths should also grasp and adapt to each country's business norms by being on the ground challenges posed by ASEAN's diverse cultures.
Photo: sergio souza on Unsplash