Chinese Investment Flourishes in Southeast Asia

Chinese Investment Flourishes in Southeast Asia

Amidst the attempts to avoid American tariffs, Chinese companies have catalyzed their pace of investments in Southeast Asia. These investments have effectively contributed to the economic development of the countries in this region. In its report, the Asian Development Bank highlights how the trade conflict between China and United States has only went on to accelerate the investment links of China in the developing Asia.

Vietnam has particularly attracted Chinese foreign direct investments because of its geographical proximity and availability of cheap labor. During the first five months of 2019, Chinese investment in Vietnam increased to $1.56 billion, surpassing the overall total for 2018. According to a Nomura Holdings report, the country has also seen the greatest financial impact of the Chinese investments in Southeast Asia.

Chinese investment paved its way into Philippines, especially after Chinese President Xi Jinping met President of Philippines Rodrigo Duterte last year in Manila. This diplomatic encounter resulted in the signing of cooperation agreements over 29 projects. In 2018, China moved ahead of Japan in terms of foreign direct investment in the Philippines.

South Korea and Thailand, among other countries, have also seen abundant Chinese capital inflows this year. Majority of which are a consequence of relocation and expansion of Chinese companies.

The pressure to search alternative sites for production stems from the trade conflict between China and US. Many Chinese companies have registered their concerns regarding this conflict and are actively preparing to cater to whatever circumstances they may have to face, including relocation and branching out.

Luo Shanshan, Director Shenzhen H&T Intelligent Control, expressed how despite of initially being based in Guangdong Province, the company will be globalizing itself in order to avoid the trade conflict between US and China.  Shenzhen H&T Intelligent Control is a local electronics manufacturer that recently decided to set up a production unit in Vietnam.

Chinese multinational electronics companies, such as Lenovo and TCL, also plan to install their production units and factories in Vietnam. GoerTek, a Chinese acoustic components company, which assembles Apple’s AirPods has already been approved to build their plant in Northern Vietnam.

With rising threats of another round of increased tariffs by the Trump administration, this trend of Chinese foreign direct investments can only be expected to rise. On the flip side, however, the production shifts may largely impact the employment and investment in China, potentially resulting in greater unemployment.