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China is now positioned at or near the forefront of the global value chain, according to a vice president and international investment strategist at JP Morgan Private Bank. Supply chains across Asia are becoming increasingly diverse and sophisticated, especially as Chinese companies advance up the value chain and ramp up the production of high-value manufactured goods.
Different countries within the Association of Southeast Asian Nations (ASEAN) possess varying levels of industrial expertise and development. For instance, Malaysia is more advanced, especially in semiconductor manufacturing and data centers, while Indonesia remains focused on primary industries like nickel mining and processing.
In recent years, the trade relationship between China and ASEAN has seen notable shifts, with the latter now serving as China’s largest regional export market, effectively surpassing the United States. Last year, approximately 16% of China’s exports were sent to ASEAN, compared to 14% to the US.
China’s long-standing trade deficit in electronics with ASEAN has transformed into a growing trade surplus, highlighting China’s strengthened dominance in this sector and the relocation of its manufacturing capacity to other markets.
ASEAN has become an increasingly vital partner for manufacturing, investment, and market access for Chinese enterprises. This trend extends beyond manufacturing into the digital economy and entertainment sectors. Chinese companies have successfully expanded their local business models in e-commerce and mobile gaming into ASEAN markets.
Most Southeast Asian nations support foreign direct investment, recognizing its role in boosting local manufacturing, generating employment, and improving labor structures. China’s FDI in the region continues to grow, making it a significant source of cross-border investment.
The influence of Chinese investments in Southeast Asia goes well beyond capital injection. For example, investments in new energy vehicles and batteries in Indonesia are fostering industry upgrades and creating jobs across manufacturing, transportation, and service sectors.
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