The Southeast Asian region is experiencing an unprecedented economic and industrial boom as a result of rising consumer demand, government decarbonization mandates as well as diversification priorities under the so-called “China Plus One” shift. The rapid expansion of electric vehicle (EV) adoption, battery manufacturing, logistics and consumer services is attracting a growing number of investors to growth opportunities across the member states of ASEAN.

The automotive and two-wheeler EV sector in Thailand, Indonesia’s battery cathode precursor manufacturing, Vietnam’s lithium-ion cell assembly, and the regionally booming sectors of third-party logistics (3PL) and digital consumer services have seen an uptick in investment from private equity firms originating in South Korea and Japan, as well as Greater China and Singapore. Many of these firms from different Asian financial centers first gained experience in China’s domestic market before opening up to the wider region.

Private equity firms have accumulated 10-20 years of investment experience in China on average before opening to Southeast Asia. This has posed both challenges and advantages. As recent geopolitical developments demonstrated – including lockdowns during the global pandemic, trade wars and the weaponization of supply chains – an overreliance on China can, in and of itself, represent a business risk. This is one reason companies are looking to diversify their manufacturing and supply chains as part of the China Plus One strategy by approaching alternative hubs in Vietnam, India, and Malaysia and beyond the region.

On the other hand, the extended timeline of their operations in China has granted these firms several advantages, including the opportunity to mature in a large domestic market and oversee several business cycles complete with contractions and expansions, as well as regulatory changes under the unique system of state capitalism.

South Korea’s MBK Partners provides one example of why this trajectory may merit closer scrutiny. Its China portfolio includes transactions involving state-linked automotive groups. The firm completed its acquisition of CAR Inc after negotiations with Beijing Automotive Group, a Beijing municipal state-owned enterprise. The transaction illustrates the extent to which some regional private equity activity in China has intersected with state-controlled industrial networks. MBK also co-invested in eHi Car Services – China’s second-largest car rental company – alongside Dongfeng Asset Management, associated with the state-owned Dongfeng Motor group, as part of a deal worth nearly a billion dollars.

Similar tension was also apparent in the United States, where at a reception held in Nashville in July, MBK Partners and Young Poong Group reportedly presented themselves to Tennessee stakeholders as the largest shareholder group supporting Project Crucible, a joint venture in Tennessee between KoreaZinc and the U.S. Department of War. KoreaZinc is a South Korean non-ferrous metal smelter and a strategic supplier of critical minerals to both the United States.

The event hosted by MBK-Young Poong coalition raises eyebrows because they previously opposed the US-backed initiative, highlighting in company communiqués that the project would place core national technology in the hands of the U.S. government. The event’s invitation indicated that Tennessee Governor Bill Lee was expected to attend, although he ultimate did not. This can be, in part, attributed to the fact that MBK and Young Poong have been engaged in a control battle against the current controlling shareholders of KoreaZinc and its current management since 2024. The episode has raised questions regarding MBK’s efforts to position itself publicly as a leading supporter of the JV developed by KoreaZinc, despite noted previous opposition to the initiative. Such cases underscore the need to examine how China-based relationships may shape private section expansion elsewhere across the West.

This mirrors the business strategies of several other Asian investors. Hong Kong-based BPEA EQT has spent billions in Greater China over the past three decades in sectors including healthcare, technology and logistics. The firm invested over $100 million in China’s MediTech Limited and raised over $1.2 billion to develop logistics properties in gateway cities across the country.

Japan’s Advantage Partners expanded into China in several sectors simultaneously, including in manufacturing, consumer and business services. Its investment in Qin Jia Yuan, a multimedia and advertising development company, represented a significant strategic growth opportunity.

Experience in these sectors become increasingly relevant as Southeast Asia’s current stage of development often resembles earlier stages of China’s growth.

Foreign direct investment is reaching record highs in the region, making it one of the fastest-growing outsourced logistics markets in the world, projected to reach over $216 billion in value. Malaysia and Singapore play significant roles in this. The region is also becoming a leader in the EV sector, and, importantly, this applies to both the adoption and the manufacturing of electric vehicles. Market penetration in new vehicle sales has recently surpassed 40 percent in countries like Vietnam and Singapore, while Indonesia secured deals surpassing a billion dollars in value from both BYD and Hyundai for the building of manufacturing plants.

MBK Partners’ experience managing mobility platforms in China includes transactions involving entities connected to major Chinese state-owned automotive groups. As it expands into Southeast Asia, those ties may invite closer examination from investors and regulators concerned with governance, strategic dependency and exposure to China-linked state interests. Hong Kong’s PAG and BPEA EQT, in addition to China’s own Hillhouse Investment, can adapt and expand their existing portfolio in logistics, manufacturing and consumer businesses. Similarly, Japan’s Advantage Partners can help scale Southeast Asian businesses in areas ranging from consumer packaging to pharmaceuticals. More broadly, for regional investors with extensive operating histories in China, this experience is therefore not merely a commercial exercise. Prior partnerships with Chinese state-owned groups require closer scrutiny as firms enter new Southeast Asian markets, particularly where investments touch strategic infrastructure, mobility or critical supply chains.

Strategic corporate investors are already signaling which sectors private equity firms might follow them into in the near future. Industrial giants such as battery and EV firms CATL, BYD, Gotion High-Tech and EVE Energy are transforming Southeast Asia into a fully integrated production area. They are capitalizing on Indonesia’s vast nickel reserves in upstream investments, the push for EVs implemented by Thailand’s government, and the scaling up of existing operations in Malaysia and Vietnam.

Regional private equity firms are positioned to contribute much more to Southeast Asia’s growth than private capital alone. Investors from South Korea, Hong Kong, Japan and mainland China bring several years of sector-specific operational expertise to develop the EV, manufacturing, logistics and consumer services industries.