China reigns supreme in manufacturing, opportunities await Asian neighbours through diversification

Vietnam alone doubled its exports to the US over the past five years.

China continued to be the top choice for manufacturing due to its highly skilled talent pool, robust infrastructure and established supplier ecosystem, but the growing trend in supply chain diversification opens up opportunities for other Asian countries, Cushman & Wakefield (C&W) said.

In a new report, the global property services company said China makes up more than half of all warehousing employment in Asia Pacific, and is home to four of the five busiest container ports globally.

Accounting for 15% of global exports and the top trading partner for over 120 countries, the economic giant easily eclipses its APAC neighbours, C&W said.

Other countries in the region, however, still have room to catch up as the series of supply chain disruptions, which peaked during the COVID-19 pandemic, are pushing companies to build supply chain resiliency through diversification, according to the report.

C&W’s Head of Supply Chain and Logistics Advisory for APAC, Tim Foster, expects the diversification trend to continue mainly due to the growing intraregional trade, aggressive manufacturing expansion in emerging economies, and the ongoing conflict in the Middle East.

“Companies have been manufacturing in China now for, in many cases, decades – so the existing supplier ecosystems are really entrenched, in most cases they are very efficient, and quite often they are very hard to replicate,” Foster said.

The report found that factory activity outside of China is picking up, with Vietnam leading the race to attract demand from the US. With its proximity to China, cheap labour costs and support from the government, Vietnam had doubled its export volumes to the US over the past five years according to the study.

“Asia Pacific’s demographic tailwinds mean that we will increasingly see production within the region consumed within the region,” said Dennis Yeo, C&W’s Head of Investor Services and Industrial & Logistics for APAC.

“This presents enormous opportunities for countries like Vietnam, Indonesia, Thailand, Malaysia and the Philippines to increase their share of manufacturing exports, while India in particular will see its nascent export manufacturing market strongly supported by a growing domestic market,” Yeo added.