Taiwan-based Hon Hai Precision Industry is the top Asian investor by number of subsidiaries, with 819. (Photo by Sam Yeh/AFP via Getty Images)

Asia is the fastest-growing region of the world economically, accounting for more than two-thirds of global growth in 2019. The signing of the Regional Comprehensive Economic Partnership (RCEP) in 2020, a trade deal involving ten members of the Association of South East Asian Nations plus China, Japan, South Korea, Australia and New Zealand, looks set to accelerate Asia’s power even further. When it comes to establishing subsidiaries, Asian investors are fuelling this surge by prioritising their own region.

Our multinational companies (MNC) database contains information on 2,190 of the world’s top MNCs by revenue, including how many subsidiaries they have and where they are located. Of these companies, 788 are based in Asia and have established 40,398 subsidiaries globally.

Of the 788 companies analysed, 219 are based in China and account for 30% (12,133) of subsidiaries established by Asian investors. On average this equates to 55 subsidiaries per company.

Japanese companies rank second by number of subsidiaries with 10,476, followed by Australian companies with 4,351 subsidiaries globally. While more Indian companies (81) were analysed than Australian companies (66), Indian companies set up fewer subsidiaries, with 3,486 established globally.

The 483 investors from China and Japan account for 56% of subsidiaries established by Asian companies, highlighting the dominance of companies from these countries.

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Where do Asian companies establish subsidiaries?

Asian companies have established 77.9% of their subsidiaries in Asia, while 56.7% of subsidiaries are located domestically, in the investors’ home countries.

Of the top ten countries for Asian companies to establish a subsidiary in, seven are in Asia. The US, UK and British Virgin Islands are the only non-Asian countries ranked in the top ten.

China and Japan, two of the world’s biggest economies, dominate as Asian investors and recipients of subsidiaries, with 46.3% of subsidiaries established by Asian investors located in one of the two countries.

China is the leading destination for Asian companies to establish a subsidiary in, with more than one-third of subsidiaries (13,352) set up in the country. China’s protectionist economy encourages local companies to set up in the domestic market. Chinese companies themselves established 84% of their subsidiaries in China, hence its dominance as a destination for Asian companies’ subsidiaries.

Asian companies favour the US to establish operations outside of their region, with 2,198 subsidiaries established in the country. Despite tariff and trade barriers, introduced by then president Donald Trump in 2018, aimed at discouraging Chinese investment in the country, the US remains an attractive market to Asian investors, including Chinese companies, who have located 122 subsidiaries in the US.

The UK ranks seventh as a location for Asian investors to set up a subsidiary and is the second most popular outside of Asia, behind the US, with 1,121 subsidiaries established. Following its exit from the EU, the UK is seeking closer trade agreements with many Asian countries and has applied to join the Asia-Pacific Free Trade pact. If the UK succeeds in developing stronger relationships with the leading Asian countries, it may become even more attractive as a destination for Asian companies to invest in.

Construction and tech companies have most subsidiaries

The top Asian investor by number of subsidiaries is Taiwan-based Hon Hai Precision Industry. The tech company has established 819 subsidiaries.

Of the top ten Asian investors, eight are companies from the Greater China region, which account for 10.4% of subsidiaries established by Asian investors. These companies span a range of sectors, with construction the most prominent.

Overall, construction companies are the top Asian investors, accounting for 22.6% (9,148) of subsidiaries established. Technology and communications companies rank second with 6,440 subsidiaries. Together these sectors account for 38.5% of subsidiaries established globally by Asian companies.

While Covid-19 has slowed economic growth globally and forced investors to reassess where they establish operations, the RCEP, the Asia-Pacific Free Trade pact and there being few signs of the US-China trade war thawing are likely to ensure Asian investors continue investing in Asia, fuelling the region’s growth even further.