ASEAN FDI outlook: The significance of Chinese investors

 Machinery Carno Việt Nam- a Chinese enterprise in Vietnam

>> ASEAN FDI outlook: Who benefits from what?

Traditionally, intra-ASEAN, the US and the EU have been early movers of investing in ASEAN. In the manufacturing space, ASEAN’s backbone of FDI, has seen heavy influence from Japanese and Korea investors. The former has turned Thailand into a regional hub for automobiles, and the latter has transformed Vietnam into an emerging centre for consumer electronics. China, compared to others, is no doubt a later comer. That said, China has been expanding its investment footprint to ASEAN and catching up with peers swiftly. While the US and the EU remain two sizeable investors, they are largely important sources for the financial sector and manufacturing, typically geared towards advanced manufacturing.

On the other hand, China, who used to concentrate its investment in the property sector, has been ramping up great efforts in investing in ASEAN’s manufacturing sector. If we look at manufacturing, Indonesia, Vietnam and Thailand have seen a sharp jump in China’s FDI share. It is obvious to note that Chinese investment varies by the comparative advantage in different ASEAN economies.

China's FDI share increasing across the ASEAN region

In Indonesia, Chinese investment, including its leading EV battery maker CATL and stainless steel manufacturer Tsingshan, has been key in facilitating its nickel smelter boom, a key input for producing EV batteries. That said, Indonesia is not the only candidate for China’s FDI along the EV supply chain. China’s top EV producers, BYD, Great Wall Motor (GWM) and SAIC, all have set up production lines in Thailand, given its strategic position in the automobile supply chain and generous subsidies.

>> ASEAN FDI outlook: Who invests in where?

Elsewhere, Malaysia is also competing in the EV manufacturing space. Not only has it attracted three Chinese investors, BYD, Great Wall Motor and Chery this year alone, Tesla has also recently picked Malaysia to be its destination for production expansions. Meanwhile, China’s investment also extends to Malaysia’s growing solar sector, with Risen Energy announcing its first facility investment in Southeast Asia worth over USD10bn in the next 15 years. In the case of Vietnam, mainland Chinese investors are also eyeing its consumer electronics industry, with two of Apple’s three major suppliers pouring investments in Vietnam to expand capacity.

While China is not a dominant FDI provider in Singapore, investors have also made a move in its strategic high value-added pharmaceutical sector. The only exception is the Philippines, where Chinese FDI is almost negligible.

All in all, the race for FDI has started, and the clock is ticking. Despite a near-term subdued trade outlook, consistent FDI inflows should help ASEAN to continue climbing up the value chain and solidifying their significance in global trade.