This is why Japanese, Korean, and Taiwanese manufacturers are looking to move production to countries with a lower cost base. Even Chinese companies are thinking of relocating their manufacturing facilities elsewhere because they’re no longer as competitive.
Countries such as Vietnam, Cambodia, and Indonesia not only have a lower cost base due to low labour costs – they are also in close geographical proximity to these developed markets, which makes for convenient management of production facilities as well as employees. “They are literally in China’s backyard,” Lee points out.
The right time
The US was previously the facilitator of global trade, but the direction is changing now with Trump at the helm. Prior to and immediately after Trump’s victory, Asia-Pacific consistently outperformed all other markets.
Despite the initial excitement that led investors to gravitate towards developed markets such as the US and Europe, the tables have turned in the three months following Trump’s inauguration – as emerging markets in the ASEAN region are now back in favour.
Intraregional trade has also increased among ASEAN member countries, with China becoming the dominant trading partner. “If ASEAN can develop a good ecosystem that enables its member countries to trade amongst themselves, that could foster resilience against the US’s protectionist stance,” Lee observes.