Asia Trade: The heart of world trade responds to change

Asia Trade: The heart of world trade responds to change Asia is the engine and heartbeat for world trade. It produces and consumes more than anywhere else on the planet. Yet, digitalisation and ESG (Environmental, Social & Governance) factors alongside supply chain disruptions are rapidly changing trade and global supply chains. Citi’s Megha Chopra and Kanika Thakur assess the impact and how new solutions are helping companies to thrive as they do business across this diverse region. 1. What key trends and trading patterns are you seeing in the region? Megha: There are three noteworthy themes. First, and most importantly, is the ongoing disruption to supply chains, which is forcing corporates to de-risk. Many are adding new geographies to their supply chains to balance geopolitical risk, with numerous new supply chains being created across Asia. Second, there is strong emphasis on ESG – particularly sustainability. This has been fuelled by the pandemic, and demand from customers of Asian corporates has provoked businesses to place a much greater focus on their ESG agendas. Looking ahead, we believe that those that prioritise ESG will see strengthened trade flows. Finally, the development of e-commerce and changing business models are leading to cash pressures and encouraging organic trade financing opportunities. Unlocking cash from the working capital cycle — both in new age as well as traditional industries is a trend to stay. 2. The ongoing disruptions continue to have repercussions for businesses across the globe. What is the current state of play in Asia? Kanika: There has been an uneven recovery across the region and the current geopolitical instability and pandemic resurgences have added further pressures. From the shortage of semiconductor chips to critical food supplies, port clogging and spiralling commodity and energy costs, the trade business continues to be heavily impacted. We expect these issues to linger at least for the medium-term. As such, buffers will need to be built into the supply chain, which will add working capital pressures for buyers and the wider supply chain. Megha: That said, Asia is the World’s Biggest Factory and the World’s Biggest Market. While GDP of some economies are coming under pressure, we expect businesses to be more adept at dealing with uncertainty than they were, let’s say, in 2020. Clear moves towards building resilient supply chains At a glance Ongoing supply chain disruption, increasing inventory needs, ESG and the growth of e-commerce are influencing trade in Asia While companies are more adept at dealing with uncertainty, pandemic rebounds and geopolitical issues are pushing them to make long term commitments to digitisation, transparency in supply chains and unlocking cash from operations ESG will be a driver of innovation in the region, with corporates taking ESG beyond board rooms and into real sustainable actions engaging their ecosystems Partnering with fintechs whilst investing in its own people, products and technology is enabling Citi to support its clients’ growth ambitions in times of volatility Megha Chopra Head of Trade Sales & Client Management, Asia Pacific, Treasury and Trade Solutions, Citi Kanika Thakur Head of Trade, Asia Pacific Treasury and Trade Solutions, Citi