SEVERAL international companies have been leaving China for Southeast Asian countries. In 2023, for example, Sony completed the transfer of its camera production line to Thailand.
This is nothing new, however. Companies have been moving out of China to other countries since 2015, and there are several reasons for this.
Aging workers, increased hiring wages as well as other reasons like COVID and politics are some of the reasons why the People’s Republic of China (PRC) is losing international investors/companies to Southeast Asia.
In contrast, Southeast Asia is relatively untapped land. The ASEAN region is still demographically young, relatively stable politically, and is situated in a lucrative logistics area. So it shouldn’t come as a surprise that companies would move their assets and production lines south.
This trend will continue until our region becomes less lucrative as an offshore manufacturing destination (or the global economy collapses), in which case the companies move to other regions for lower costs. Ad infinitum.
But I would argue that the movement of businesses to Southeast Asia would make the political situation in our region tenser. China has just lost companies and investors that offered a lot of capital and technology. Does anyone really think they won’t do anything about it?
Personally, I don’t, and I think China’s increasing naval agitations is partly driven by that. My theory is that the PRC will increase the pressure on the West Philippine Sea to control the flow of goods through our region.
If that is the case, I wouldn’t be surprised if ASEAN would increase its military budget, which ironically could drive investors away from our region.
Southeast Asia has always been a major source for trade, and given the already turbulent political situation, increased wealth would just be another incentive for conflict./PN
