Southeast Asia’s manufacturing industry quietly grows

Southeast Asia's manufacturing industry quietly grows

As one of the world’s largest consumer electronics markets, China has always been a battleground for foreign investment. In the golden age of the labor dividend, China attracted a large number of foreign-funded enterprises to set up factories; since then, with the weakening of labor advantages, the phenomenon of corporate relocation has become increasingly apparent.

Today, in the context of the uncertain global trade situation, some views suggest that the Sino-US trade friction has accelerated the pace of relocation of Chinese companies (including multinationals and Chinese companies), and the biggest beneficiary of this trend is Southeast Asian countries.

In fact, Southeast Asian countries have benefited a lot.
Some industrial chains have formed new manufacturing clusters in Southeast Asian countries. For example, Vietnam has clustered labor-intensive companies, and Malaysia has clustered semiconductor packaging and testing companies.In 2018, Vietnam’s gross domestic product (GDP) achieved a growth of 7.08%, leading Asia’s and even global GDP growth. Among them, the construction industry and service industry are the mainstays of the above growth, contributing 48.6% and 42.7% of GDP growth, respectively. In 2018, the output value of the country’s construction and service industries increased by 8.85% and 7.03%, respectively.

In the first quarter of 2019, Malaysia attracted 29.3 billion ringgit (about 48.7 billion yuan) in foreign investment, a year-on-year increase of 73.4%. Among them, the country ’s manufacturing industry has attracted foreign investment of up to 20.2 billion ringgits (approximately RMB 33.6 billion), a year-on-year increase of 127%, which has become the main factor driving investment growth.In addition, the World Investment Report 2019 shows that in 2018, Singapore, Indonesia, and Thailand all experienced significant growth in foreign direct investment (FDI) inflows. According to the latest data in 2019, compared with the same period of previous years, the amount of FDI absorbed by the ten ASEAN countries has increased significantly.

However, the tide of migration has not arisen because of a trade war.
“The transfer of manufacturing to Southeast Asian countries is not just for Chinese companies, but also for companies in other countries and regions, and it began long before the Sino-US trade war. From China’s perspective, there are two main reasons for this trend: One is that China’s requirements for environmental protection are getting higher and higher, and the other is the rise in labor costs. From the perspective of businessmen, the transfer of manufacturing is mainly due to costs and profit, and there is no need to discuss politics too much. The impact of the pattern on the business environment is another matter. “Wang Yuzhu, a researcher at the Institute of Asia-Pacific and Global Strategies of the Chinese Academy of Social Sciences, said in an interview with” Economy “magazine and Economic Network reporters. Wang Yuzhu pointed out that the transfer of manufacturing to Southeast Asian countries mostly occurs in two labor-intensive and resource-intensive industries, and Southeast Asian countries also have obvious advantages in the above two fields. For example, Cambodia currently has a per capita monthly salary of less than 200 US dollars (about 1375 yuan).

The transfer of manufacturing companies to Southeast Asia is theoretically in line with our industrial upgrading. Some companies have transferred part of their business from China to Southeast Asian countries, but the link with China on the industrial chain has not been broken. Taking Vietnam as an example, the transfer to most of the companies in this country do not go to southern Vietnam, but in northern Vietnam. Why? Because they are close to China, the supply of parts and components industry of these enterprises is still in China, and Southeast Asian countries cannot do this.Some people have seen that some Chinese companies have moved out and feel that this is not good for China. In fact, as a country along the “Belt and Road”, Southeast Asian nations are becoming more prosperous.

At the same time, Southeast Asian countries must work harder. At least for now, it is difficult for these countries to have a sound industrial chain. China has experienced nearly 40 years of development and has become a country in the entire industrial chain, benefiting from the “large land” and “population”. Judging from the possible economic development, resource types, and human resources development of Southeast Asian countries in the future, these countries are not yet likely to develop into full industrial chain countries.
Wang Yuzhu said, “Most of the international finished shoe market is Made in China, and now most of them are made in India. In fact, for some time, shoes made in Vietnam are also common and then decreased. Why? Because it is necessary to supply such a large world Market, Vietnam ’s leather goods market is not available. India is not the same. It has a large population, large leather production, and relatively strong supply capacity.”