Malaysian ranks 2nd in the world on the impact of increased businesses from the Chinese economic boom

 

10 April 2006. Owners of medium to large enterprises (MLEs) in Malaysia see net benefit from the fast growing economy in China, according to the results released today from the 2006 Grant Thornton International Business Owners Survey (IBOS).

Malaysia ranks second (22%) only to Hong Kong (53%) in the global responses about the impact on business arising from the Chinese economic boom. Malaysia stands ahead of Singapore (15%) and Philippines (13%) whilst businesses in Thailand are most pessimistic (-39%) of their business prospects arising from the above impact.

The “China Business Impact” results mark the first time an independent survey of business owners in Mainland China was conducted by the IBOS in 2006, which surveys more than 7,000 business owners from medium to large enterprises (MLEs) in 30 countries. In Malaysia, the survey is a joint collaboration between Shamsir Jasani Grant Thornton and ECM Libra Berhad.

When asked about the impact of the economic boom in China on their business over the last two to three years, 33% of MLEs in Malaysia responded that they have seen increased business whilst 11% reported a decrease. The rest stated that the “Chinese economic boom” had no significant direct impact on their business.

However, even amongst the neutral respondents, some did emphasize that there could have been an indirect impact arising from the increase in commodity prices such as palm oil, a significant industry and export for Malaysia.

“The above reflects the rational thinking and versatility of the Malaysian MLEs, many of which are managed by entrepreneurs,” said Dato’ N K Jasani, Managing Partner of Shamsir Jasani Grant Thornton. “Our MLEs have been able to take advantage of the low manufacturing costs of China and have contract manufacturing and value-added strategy. As for those involved in agriculture, plantations and mining, there has been a direct benefit from the increased demand and higher prices,” elaborated Dato’ Jasani.

“China is the world’s current flavour. We believe that a stronger Chinese economy translates into win-win stories for all. The Chinese economy continues to hold long-term opportunities for Asia/Pacific companies and for global investors,” echoed Dato’ Kalimullah Masheerul Hassan, Executive Chairman and Co-CEO of ECM Libra Berhad.

China’s emergence as an economic superpower has had net positive impact on East Asia and on the wider global economy. To focus more closely on the effect on medium to large enterprises, the survey asked business owners outside Mainland China on the impact of the Chinese economic boom on their business over the past two to three years (see figure 3 below).

The boom has provided a healthy backdrop for many enterprises. The East Asia or the wider Asia Pacific region features prominently among those reporting an increase in business. This reflects opportunities presented by the increased volume of trade in the region (e. g. Hong Kong); export opportunities to the growing market in Mainland China (e. g. Malaysia) and Mainland China’s growing demand for commodities (e. g. Australia).

There are two significant exceptions to the general view that business has increased as a result of China’s boom. Businesses in Japan appear to be largely unaffected, but this is not entirely unexpected, given that many medium to large businesses in Japan tend to focus on domestic sales, providing products or services to very large Japanese companies that might well have seen an increase in business. What is surprising is that in contrast to its neighbours, and despite strong export growth in recent years, Thailand reports a large negative impact – the largest in the survey – from the Chinese boom.

The percentage balance presentation (see figure 3) masks an interesting facet of the results. In Mexico, the Philippines and Taiwan, Mainland China’s boom has had a dual impact, increasing business for many respondents while simultaneously decreasing it for another sizeable proportion. This emerges from figure 4 (see below) which shows the countries with the largest proportion reporting increased business and the largest proportion reporting a decrease. These three countries/territories feature in both.

Mainland China is viewed as the country with the greatest potential for business opportunities over the next two years (cited by 21% of respondents) well ahead of the next country (the US with 8%). Among individual countries / territories in Asia, over half of the medium to large businesses in Hong Kong and Taiwan perceived Mainland China as offering the best opportunities internationally, with around one third of businesses in the Philippines, Thailand, Singapore and Japan also making the point. Outside Asia, around a third of businesses in Australia and the US perceived Mainland China as providing the best business opportunities.