Every June, FCI publishes its Annual Review, giving an overview of progress made by the world's most extensive and important factoring network. The Annual Review presents FCI's annual figures and global factoring statistics. In this extract from the FCI Annual Review 2024, we explore the Regional Updates for Asia-Pacific, presented by Mr Lin Hui, FCI Regional Director North East Asia and Mr Thompson Lui, FCI Regional Manager South and South East Asia.
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2023 Figures
North East Asia
North-East Asia recorded 7% growth in 2023. Mainland China was the main driver, with a 10% increase over the previous year. Despite an economic slowdown in China, such strong growth is remarkable. It reflects that factoring and supply chain financing benefit from China’s macroeconomic policies, which have shifted focus from the property sector to the manufacturing sector to support the real economy. China accounts for 81% of the region’s market. However, Hong Kong’s market underperformed, shrinking by more than 20%. Japan experienced modest and steady growth, while Taiwan saw a surprising drop of 14%.
South and South East Asia
South and South East Asia (SSEA) showed significant growth of 12.5% in 2023 compared to 2022, rising from EUR 126 billion to EUR 142 billion. The highest increase was in Singapore at 36.4%, followed by India at 10.2%. In 2023, EDI volume grew by only 5.3%, while other regions experienced a decrease. We should expect India and Vietnam to grow stronger than other emerging markets in SSEA for years to come. India and Gift City will play significant roles as the growth engine of this region.
Legal, Regulatory and Advocacy
North East Asia
In 2023, China implemented a series of major financial regulatory reforms and measures. The National Financial Regulatory Administration (NFRA) was formally established to enforce unified supervision, consolidate financial market order, contain risks in the financial sector, and steer financial resources flow to the real economy. China Securities Regulatory Commission (CSRC) stepped up its crackdown on financial frauds by listed companies. SASAC, the supreme governing authority of SOEs, banned SOEs from trading to obtain financing. Combining these policies will undoubtedly create a favourable environment for factoring to better serve China’s real economy.
South and South East Asia
2023 was a year when FCI planted seeds with some of the regulatory bodies and started to see some actions in terms of working together in this regulatory landscape. We have begun engaging with key markets like India, the Philippines and Vietnam. For instance, FCI has started to explore the possibility of working with the regulatory body of GIFT City India, where the jurisdiction is encouraged to innovate to cope with the exponential growth of international trade and foreign investment. FCI should expect to work with the International Financial Services Centres Authority (IFSCA) towards some common goals and create synergies from 2024 and onwards. We expect the Philippines and Vietnam to develop swiftly in this field.
Promotion and Awareness
North East Asia
In March, our members in Beijing celebrated the 30th anniversary of ‘FCI in China’, looking back at the development of the Chinese market from scratch. Immediately following this, we held a far-reaching seminar in Shanghai to discuss the new challenges and goals of FCI in China for the next 30 years. Factoring is no longer a niche market in China; it is about enabling a wider range of businesses and their supply chains with enhanced liquidity and risk management support. The focus of the new China strategy is to create a marketplace of productive engagement in China where the power of FCI’s member network can be fully unleashed, providing a new paradigm for FCI’s global marketplace.
South and South East Asia
In the year 2023, we supported promotion in certain markets in the area. In the first quarter, we joined efforts with some local stakeholders like the International Chamber of Commerce (ICC) and Bangladesh Institute of Banking Management (BIBM) to promote international factoring and visit local members (many newly joined). Also, in the same quarter, FCI held a promotional event in GIFT City India in the finance and technology area to explore the fintech development and ‘marketplace’ possibilities and our event was very well received. In the 3rd quarter, I spoke at an event that IFC and FCI jointly organised together with local members and sponsors in risk management and supply chain management. I also took the opportunity to meet with local members in Singapore during the same week.
Membership Mobilisation
North East Asia
The membership structure in the region is dominated by banks with a high penetration rate and a stable number of members. Most of them are mainly engaged in export factoring and are therefore keener on adding banks from other regions as import factors rather than adding new members from this region. A much more proactive approach would be to encourage FCI business between members in the region, thus prioritising their import factoring and FCIreverse business. Non-bank factoring companies in the region are currently mainly from China. While most are in a phase of contraction and repositioning, some are in the process of transforming themselves into FinTech companies to continue to be part of our ecosystem.
South and South East Asia
SSEA has been growing its member base for the past year, and there were 9 new additions and three terminations in 2023. I believe this net addition in membership is promising even for emerging markets, but then again, unfortunately, SSEA still has not found the product FCIreverse suitable to grow in the region. A few members inquired but were discouraged after hearing average costs and lack of service support in Asia. For the past year, the SSEA region has benefited from the repaid growth of emerging markets within the area, especially since we had some innovative platform providers joining FCI immediately upon FCI's creation of a new partnership for FINTECHs. While we only have 2 affiliate members in the region, FCI is planning to support them in upgrading to associate capacity to fit their growing needs.
Challenges
North East Asia
The fragmentation of global trade due to geopolitical considerations is causing unprecedented challenges to international cooperation. While globalisation is not dead, it is being reconfigured along geopolitical lines. Our region has suffered significantly. We must all adjust and adapt to this process. The region’s businesses, supply chains, trade flows, and patterns are changing rapidly. They demand solutions for new markets (e.g., OBOR countries), new products (e.g., automotive, batteries), and new channels (e.g., Temu, Shein), and this requires us to localise more in the region for rapid response and resilience.
South and South East Asia
New members from this SSEA region are almost entirely export factoring driven and rely heavily on FCI’s import factoring members to support their international factoring development. Some of these new members are concerned about the relatively tight credit policies and selectiveness of their import counterparties – three main destinations for this export emerging market, namely the USA, EU and China. While USA and EU markets have relatively larger pools of import factoring service providers to support their needs, China still needs to improve in terms of offering competitive and meaningful IF services. Also, speaking about import factoring capabilities, India and Vietnam, which are growing in terms of importing raw materials for manufacturing, may need to plan to take on this challenge.
Outlook 2024
North East Asia
The biggest certainty in 2024 is uncertainty. However, if we can’t handle uncertainty, we can’t handle growth. Navigating uncertainty requires a growth mindset and self-awareness. We are very aware of how tremendous market growth will be created in Northeast Asia as a hub for global merchandise trade if members here can reach or even surpass the market sophistication of their counterparts in today's European markets. Of course, we are also very aware of the region’s strengths and bottlenecks, which require our determination to change. 2024 is an important window of time for us, and it is already here.
South and South East Asia
SSEA had a great year 2023, and no market keeps growing and defies the statistic curves. We can still reasonably expect healthy growth in terms of memberships and activities as well as factoring volume. We also need to keep in mind that budget constraints can hinder growth and maintaining meaningful partnerships. In many markets, I have yet the budget to travel to meet new members for the first time since I joined FCI. Hopefully, I can grow my membership base in Indonesia, Thailand and Malaysia to justify a visit in 2024.
(Photo: © Richard Sharrocks)