Despite the present depressing economic climate, Southeast Asia stays highly attractive for foreign direct investment (FDI), and 2023 looks set to see recovery in lots of sectors.
While China’s “reopening” will provide a much-needed boost to tourism and travel from the second quarter, capital inflow trends into necessary sectors reminiscent of technology, manufacturing and infrastructure development are prone to proceed (Q2 2023).
Beyond the sheer size of the realm’s labor force and population, Southeast Asia’s growing indigenous economy provides a lucrative environment for foreign enterprises. In total, ASEAN countries are inhabited by 662 million people and their combined GDP is USD 3.2 trillion.
China has strong economic ties with ASEAN countries and needs to strengthen them by investing more in infrastructure and facilitating trade, for instance through the Regional Comprehensive Economic Partnership (RCEP).
Due to the US-China trade war and lower labor costs, many manufacturers doing business in China have been forced to relocate some or all of their supply chains to Southeast Asia.
ASEAN governments have implemented enabling policies and preferential incentives to reap the benefits of this shift in regional supply networks under the “China Plus One” or “China Plus Many” strategy. This involves reducing taxes, making it easier to do business, increasing spending on infrastructure and introducing incentives within the areas of free trade and special economic zones.
Vietnam has benefited greatly from the China Plus One strategy lately, with the manufacturing industry alone expected to account for around 58 percent of total FDI in 2020.
In response to China’s growing dominance as a producing center and a marketplace for goods and services, some countries and firms have chosen a “China Plus One” or “China Plus Many” strategy. A plan to diversify their production and provide chain by establishing a presence in countries aside from China.
The “China Plus One” or “China Plus Many” plan refers to efforts by ASEAN countries to draw foreign investment from China and other countries by presenting themselves in its place or complement to the Chinese manufacturing hub.
ASEAN countries are searching for to draw manufacturers willing to diversify their production base outside of China by providing competitive benefits reminiscent of reduced labor costs, improved access to raw materials and a hospitable business environment.
Additionally, ASEAN countries are searching for to leverage their proximity to China, making them a desirable selection for corporations looking to take care of a presence in China while also profiting from other regional markets. The quite a few free trade agreements that ASEAN countries have negotiated with China and other countries that facilitate the flow of trade and investment also profit them.
Broadly speaking, “China Plus One” or “China Plus Many” strategies are seen as a way by which ASEAN countries can diversify their economies, reduce their dependence on China, and attract foreign investment to support their growth and development.
