SINGAPORE: In recent years, manufacturers in China have increasingly moved production to Southeast Asia as a result of rising labor costs, geopolitical tensions, particularly the US-China trade war, and efforts to diversify supply chains ( the” China Plus One” strategy ). This echoes Japan’s production transfer, which contributed to the region’s industrialization during the 1980s and 1990s.
But the question remains: Will China’s” Great Relocation” encourage Southeast Asia’s long-term growth, or will it continue to languish in the middle-class and be unable to advance in both technology and performance? The benefits of this move may be in jeopardized as the US then threatens to impose severe new tariffs on exports from Southeast Asian nations.  ,
Investing, experimenting, and innovating
Southeast Asia’s leads for additional industrialization will depend on a number of variables related to China’s financial commitment to the area. The World Bank’s three I’s model, which include investment, injection, and innovation, can be used to analyze these.  ,
Size and type of investment in the region affect the effect of China’s purchase. Foreign new foreign direct investment ( FDI) in ASEAN producing increased from US$ 6.1 billion between 2016 and 2019 to US$$ 2.9 billion between 2020 and 2023 on average. Both times saw significantly higher monthly average annual sales of Chinese new FDI in the manufacturing sector than those from the US, Japan, and South Korea.  ,
A third of Southeast Asia’s production investment in 2023 came from China only. Vietnam, Thailand, Indonesia, Malaysia, and Cambodia were among the top 15 countries in the world that received Chinese producing FDI between 2016 and 2023, according to five ASEAN nations.
In nations like Cambodia and Vietnam, the total Chinese manufacturing FDI between 2016 and 2023 was significantly higher than their total manufacturing value added and merchandise exports in 2016 ( the base year ). For instance, between 2016 and 2023, China’s full FDI to Cambodia was US$ 2 billion, compared to its full FDI of US$ 3 billion and US$ 8.5 billion in goods imports.  ,
Depending on the type of purchase, manufacturing operations can have a variety of enhancement advantages. Important minerals that have been processed in China are mostly returned to China through expense that is capital-intensive and resource-oriented, such as those made by Indonesia’s processing and running industries.