Companies have reason to be sceptical about investing in Asia in general, and in China in particular, but Asian investment could still be a good bet.
Issues such as intellectual property protection and the US-China trade wars could dissuade some companies from investing in Asia in general, and China in particular, but there is still plenty of interest in the region. In China, Beijing is tightening its grip on its thriving tech industry, forcing companies such as Alipay to hold off on their public debuts, launching probes against companies like Didi Chuxing and restricting domestic start-ups’ ability to list abroad.
However, are things really as bad as they seem? After all, in many ways the Asian markets have weathered the turmoil of the past 18 months better than other regions of the world.
Take mergers and acquisitions (M&A) deals for example. Given the pandemic, it shouldn’t come as a shock that 2020 wasn’t the best year for M&A deals globally. A GlobalData review reports that $2.87bn-worth of M&A deals were announced over the 12 months across the globe, a decline of 5.4% from 2019. Deal volume also posted a year-on-year decline of 4.8%. However, investment in Asia tells a very different story.
Here’s where it gets interesting: the same report notes that while deal activity remained muted across most regions, Asia-Pacific was the only region that managed to witness growth in deal value as well as volume. Total deal value and volume for the Asia-Pacific market increased from 6,594 deals worth $486bn in 2019 to 7,621 deals worth $666bn in 2020, a 15.6% and 37% increase, respectively. The region’s technology sector led the way with a 121% growth in deal value and a 45% jump in deal volume.
GlobalData puts this success down to the fact that several Asia-Pacific economies managed to control the spread of Covid-19 and recover relatively quickly compared with the rest of the world. China in particular led the way on this front and accordingly led M&A deal activity during the first two quarters of 2020, when the pandemic and related uncertainty was gaining strong momentum globally.
This, contrary to any pandemic-related misgivings, could suggest that expanding tech companies looking to up their investment in Asia would do well to set up a base in China.
How Payoneer became a pioneer
One company that entered Asia long before Covid hit was commerce tech brand Payoneer, which is headquartered in New York but opened its first Asian offices in Hong Kong in 2015. Since then the company has opened three offices in mainland China: in Shenzhen, Shanghai and Guangzhou.