Asia-Pacific Policy Outlook for Investors in the Year of the Horse 

Here are our top 10 considerations for APAC investors in 2026 

1. APAC governments are intensifying regulatory and supervisory initiatives, but fragmentation and national priorities will limit convergence
   
   Across APAC, governments and regulators are moving from consultation and principles-based guidance to formalised rule making and active supervision in areas such as AI governance, digital assets, climate disclosure and operational resilience. However, these initiatives are unlikely to produce meaningful regional harmonisation. Regulatory trajectories will continue to reflect domestic economic priorities, geopolitical positioning, and sensitivities around data sovereignty and financial stability. Some jurisdictions are likely to advance more comprehensive regimes and tighter supervisory expectations, especially on liquidity risk, private markets and digital infrastructure. Others are moving more incrementally, relying on supervisory guidance, consultations or principles-based frameworks before introducing new binding requirements. In private markets, for example, Australia has largely relied on its existing financial services licensing framework while issuing targeted supervisory guidance and thematic reviews on private credit and valuation practices, signalling enhanced oversight rather than a standalone statutory regime. By contrast, China has adopted a more formalised approach through the 2023 Private Investment Fund Supervision and Administration Regulation, which establishes binding legal obligations for private fund managers, including registration, governance and compliance requirements. The result will be a more uneven regulatory landscape, with greater resilience and deepening in some markets alongside widening divergence across the region.

Related insight: For more on APAC regulatory fragmentation and where risks may emerge, see Flint’s take on private market dynamics and early engagement strategies in the region — Private Market Developments in APAC — Now is the time to engage

2. Competition enforcement is becoming more strategic and politically charged, increasing uncertainty for cross-border deals while tighter merger regimes capture smaller transactions

Across APAC, competition policy is increasingly shaped by geopolitical tensions, industrial priorities and digital market regulation. In China, the State Administration for Market Regulation has signalled a tougher 2026 enforcement agenda and issued draft platform antitrust compliance guidance targeting algorithmic collusion, exclusivity clauses and discriminatory conduct in digital markets, reinforcing scrutiny of large tech players.  

In South Korea, the Fair Trade Commission’s December 2025 fines on Korean Air and Asiana for breaching merger conditions underscore the willingness of authorities to actively police behavioural remedies in strategically sensitive consolidations.  

Beyond headline deals, structural reforms are also tightening merger control across the region.  Australia's transition to a mandatory suspensory merger regime from 1 January 2026, coupled with increased oversight in other Southeast Asian markets such as Indonesia, and strengthening merger enforcement in recent years, will intensify the scrutiny of mid-market transactions and roll-up strategies. This will create a more interventionist and complex enforcement landscape, where political context and industrial strategy will increasingly influence outcomes, even as authorities continue to base decisions on formal economic analysis. 

Further analysis: APAC competition policy continues to evolve under geopolitical and industrial pressure, as explored in APAC competition policy in 2025: when geopolitics meets antitrust.

3. National security scrutiny and approvals will become more prevalent 

The expanding scope of foreign investment screening regimes across APAC is increasing the number of sectors subject to national security review as part of the deal process, particularly in critical infrastructure, ports, energy, advanced technology and data.

The recent developments surrounding CK Hutchison’s ports business – including heightened scrutiny in China and the early-2026 ruling by Panama’s Supreme Court voiding its Panama Canal concession, demonstrate how infrastructure transactions can become intertwined with overlapping antitrust, public interest, and geopolitical considerations. This serves as a reminder that 'public interest' factors (such as security, sovereignty, audit findings and geopolitical signalling) can override conventional concession logic and emerge late in the process.  

More broadly, rising geopolitical tensions, supply chain vulnerabilities and concerns over strategic dependence are prompting governments to adopt a more interventionist stance towards foreign acquisitions and sensitive partnerships. As states seek greater sovereign control over assets, data and infrastructure, scrutiny of M&A, joint ventures and key suppliers in critical industries is likely to become more routine and politically charged across the region. 

4. Data centres will remain a strategic priority in APAC, but execution constraints will persist 

Across APAC, governments increasingly view data centres as critical infrastructure underpinning AI ambitions, digital growth and technological resilience. Policy momentum is shifting toward enablement, with jurisdictions competing to attract investment and anchor sovereign AI capabilities.  

However, rising political scrutiny over energy consumption, water use and perceived local economic benefits is complicating project delivery, particularly in markets such as Malaysia and Japan where community opposition has intensified. 

At the same time, grid capacity, energy security and permitting complexity remain the core execution bottlenecks. As governments balance AI-driven growth with decarbonisation and resource constraints, developers face protracted approval timelines, constrained power availability and evolving sustainability standards. While policymakers are seeking to accelerate infrastructure build-out, structural energy and planning limitations are likely to remain binding constraints in the short to medium term.

Further reading: APAC AI governance and digital infrastructure regulation remain key policy areas - Flint’s AI-PAC digest covers major developments in AI regulation across Asia-Pacific - AI‑Pac August–October edition: Flint’s digest on AI policy in Asia‑Pacific

5. Net zero commitments will be maintained, but implementation will be increasingly calibrated  

Governments are maintaining headline net zero and sustainable finance commitments, while calibrating delivery to manage economic and competitiveness pressures. Climate disclosure regimes aligned to ISSB standards are moving ahead in markets such as Australia, Hong Kong and Japan, and supervisors are embedding climate risk into prudential oversight. However, implementation is phased and proportionate, reflecting domestic market readiness and cost concerns. 

Rather than materially diluting overall climate ambition, policymakers are adjusting the pace, sequencing and design of measures – including through refinements to transition taxonomies and a greater emphasis on transition finance – to support credible decarbonisation pathways while avoiding abrupt compliance burdens. In some cases, this calibration is visible in price signals and timelines. For example, Singapore has maintained its carbon tax trajectory but signalled that the 2028 rate is likely to be at the lower end of the previously announced SGD 50-80 range, reflecting international climate policy dynamics. 

Related insight: For perspective on how climate and sustainability regulation is evolving with investor implications across APAC, see Is climate action, ESG and sustainable finance dead in financial services? – APAC insights.

6. Trade fragmentation will create opportunities beyond US-centric corridors 

Trump’s re-introduction of tariffs following the Supreme Court ruling on emergency economic tariffs shows there is little reason to expect a fundamental shift in US trade or industrial policy. However, it does reduce the speed and potential scope of future tariffs, and could reduce US leverage in negotiations with China.   

Strategic competition in semiconductors, AI and clean energy is likely to persist, even if individual tariffs evolve. In response, APAC governments are deepening intra-regional trade ties through frameworks like the Regional Comprehensive Economic Partnership (RCEP), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) expansion and new bilateral agreements, while strengthening domestic industrial strategies in critical minerals, EV batteries and advanced manufacturing. 

This realignment reinforces Asia’s role at the centre of global supply chains and future industries. Investors may benefit from localisation strategies, regional value chains and green and digital infrastructure growth, even as geopolitical uncertainty and overlapping subsidy regimes increase complexity. 

7. US strategic pressure will intensify, forcing difficult alignment choices 

US pressure on APAC partners is likely to sharpen in 2026, particularly around semiconductor export controls, AI governance and defence alignment. Economies deeply integrated with both the US and China will face harder trade-offs between security cooperation and economic interdependence. 

Responses will vary. Historical allies such as Japan, Korea and Australia are likely to align more closely with US frameworks, while others seek to hedge through diversified trade and regional partnerships. The result will be more differentiated policy pathways across APAC, adding to regulatory and investment uncertainty. 

8. Sovereign AI ambitions will intensify, driving fragmentation and policy uncertainty  

Governments are accelerating efforts to build “sovereign AI” capabilities in response to trade tensions, security concerns and economic ambitions, supporting domestic compute infrastructure, local foundation models and tighter control over data.  

These initiatives aim to reduce dependence on US and Chinese technology stacks and promote national champions. However, economies remain structurally reliant on global supply chains and foreign technology partnerships, with commercial imperatives continuing to shape implementation. For example, both India and Japan continue to rely heavily on Nvidia-designed GPUs to power national AI compute infrastructure and flagship high-performance computing systems, underscoring the persistent dependence of even advanced sovereign AI programmes on US semiconductor technology. 

The result will be uneven and sometimes conflicting policy signals – including selective localisation requirements, preferential treatment for domestic players and heightened scrutiny in sensitive sectors – creating greater regulatory fragmentation, compliance costs and market access uncertainty for investors and technology firms. 

9. Efforts to mobilise domestic savings will intensify scrutiny of the role retail capital can play in private markets 

Across APAC, policymakers are intensifying efforts to mobilise domestic savings to finance growth, infrastructure and transition finance. This is driving renewed attention on widening retail access to private markets. With banks still dominating credit provision in much of Asia, governments see private equity, private credit and infrastructure funds as important complements – particularly in the context of pension reform, demographic change and rising wealth across the region. 

However, efforts to broaden retail participation are measured. Regulators in Singapore, Hong Kong and Australia are exploring frameworks to facilitate access to long-term and alternative funds, while signalling concerns around valuation transparency, leverage, liquidity mismatches and investor protection. Singapore’s approach is illustrative. The MAS’s March 2025 consultation on a proposed Long-Term Investment Fund framework illustrates this approach, pairing expanded retail access with explicit supervisory guardrails on valuation, liquidity and investor protection. 

10. Defence spending will rise but delivery and sovereignty will shape the winners 

Defence budgets across APAC will continue to increase amid intensifying regional tensions and uncertainty over the durability of US security commitments.  Japan’s FY2026 budget allocated record defence spending (around 9 trillion yen), reinforcing a multi-year commitment to procurement, industrial capacity and supply-chain resilience, alongside a broader push to invest in strategic sectors such as AI, semiconductors and shipbuilding.  

While the US will still remain the region’s primary security provider, this reflects a wider regional shift toward deterrence, industrial resilience and reduced strategic dependence. Australia, South Korea and India are similarly prioritising advanced systems, cyber capabilities and supply chain security.  

However, rising budgets will come with sharper scrutiny of delivery, readiness and value for money. Governments are placing greater weight on deployable capability, secure data and AI-enabled systems, while balancing sovereignty ambitions against the need for allied interoperability and speed to field. Firms able to demonstrate operational credibility and scalable production will outperform those reliant on innovation narratives alone. 

We would be pleased to discuss any of these issues in more detail with you or your colleagues, drawing on expertise from our investor advisory, competition policy, geopolitical and trade, and sector teams.  

Authors: Laurence Van der Loo, Katie Whitting, Dr Lisa Ross, Gwenda Ang