Southeast Asia Outshines China in Attracting Foreign Investment Amid US-China Trade Rivalry

As the competition between the US and China disrupts global supply chains, Southeast Asia enjoys the benefits. Last year, for the first time in ten years, countries in the Association of Southeast Asian Nations (ASEAN) received more foreign direct investment than China, as reported.

The competition between the United States and China, the globe's two biggest economic giants, is creating a plethora of opportunities for Southeast Asian countries (Asean) in the form of new investments and trade variety, according to experts.

William Fung, deputy chairman of Li & Fung, which is a trailblazer in the consumer goods supply chain sector based in Hong Kong, indicated that geopolitical strains have accelerated the decision of many producers to spread their supply chains across the region. He added that this move will aid Southeast Asian nations in enhancing their infrastructure, attracting skilled workers and adopting advanced technologies.

"People, particularly manufacturers moving away from China, naturally gravitate towards Asean to circumvent potential tariff threats," Fung expressed during an interview held at the UOB Gateway to Asean Conference in Ho Chi Minh City, Vietnam. "This region truly presents a significant opportunity."

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For the first time in ten years, Southeast Asia drew in more foreign direct investment than China last year. This shift occurred as international manufacturers adopted a "China plus one" approach to their supply chains in an effort to lessen the impact of the strained relations between Washington and Beijing. A trade war that escalated during Trump's administration has increased manufacturing expenses, diminishing China's attractiveness as a low-cost production hub.

The leading economies of ASEAN – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam – drew in a total of US$206 billion in Foreign Direct Investment (FDI) in 2023. In contrast, China garnered US$43 billion in the same year, as per a collaborative report released by Angsana Council, Bain & Co, and DBS Bank.