Manufacturing sector is China’s top destination for outbound investments in Southeast Asia | Manufacturing Asia
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Manufacturing sector is China’s top destination for outbound investments in Southeast Asia

Chinese manufacturers are seen expanding their presence in the electronics and EV space.

China's outward direct investments (ODI) into ASEAN has grown significantly between 2018 and 2022, with the region’s manufacturing sector being the biggest beneficiary, according to a recent study by DBS. 

A recent DBS research showed the ASEAN manufacturing sector drew a total of US$33.3b in outbound investments from China over the past five years, equivalent to a compound annual growth rate of around 16%. 

It said one major driver of these investment outflows is the ongoing global supply chain reconfiguration as well as trade war between the world’s two largest economies, China and the US, which prompted Chinese firms to relocate some of their manufacturing operations to Southeast Asia. 

China’s massive infrastructure plan, the Belt and Road Initiative, also bolstered mainland investments in the region, it added.

With established manufacturing bases, strong trade relations and proximity to China, DBS said ASEAN remains a prime destination for Chinese companies who want to expand their footprint in the regional and global supply chains. 

It expects China to continue pouring in more resources into the ASEAN manufacturing sector especially with the electronics and electronic vehicle (EV) sectors on the rise.

For instance, Vietnam already has a strong production network in place for electronics products especially smartphones, while Malaysia and Thailand are both boosting their electronics manufacturing capabilities as well.

Resources-rich countries like Indonesia are also particularly appealing for Chinese manufacturers of EV parts. The rising adoption of EVs in ASEAN also presents expansion opportunities for Chinese automakers. 

Across all sectors, China’s ODI into ASEAN has risen by 8% in CAGR from 2018 to 2022, reaching US$18.7b for 2022 alone, according to DBS. The economic giant remains ASEAN’s fifth largest source of foreign direct investments. 

By country, Singapore and Indonesia were the top investment destinations for Chinese mainlanders.

DBS expects Chinese ODI flows into the region could further rise at a CAGR of 10% in the coming decade, potentially ballooning to US$40b by 2030.

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