Manufacturing News

ASEAN unlikely to replace China as world's top manufacturer

In the past decade, foreign investments have gradually shifted from China to India and the members of the Association of the Southeast Asian Nations (ASEAN) but ASEAN is not likely to replace China as the world's top manufacturer, according to Nguyen Huy Hoang, Deputy Director General of the Institute for Southeast Asian Studies of the Vietnam Academy of Social Sciences.

In a recent interview with Xinhua, Hoang said there are several factors as to why the regional grouping, composed of the new emerging economies, could not replace China as world's top manufacturer.

Hoang explained that the shift of the foreign investments to ASEAN is primarily due to adjustments in China's investment policies towards service-oriented economy or intellectual economy, focusing on areas with higher added value.

In addition, foreign investors also want to take advantages of ASEAN's large population, cheap labor, robust economic growth and increasing number of the middle class--people with high consumption demand and these are the key factors to boost manufacturing and investments.

Southeast Asia is emerging as a dynamic region in economic development, attracting foreign investors and becoming a favorite destination for international manufacturers.

During the past years, ASEAN countries still adopted export- based economic development. When ASEAN's major markets, including the United States and the European countries, faced economic slowdown,the import demand from those countries declined, Hoang said.

However, ASEAN countries have adopted timely policies to deal the global economic downturn, maintaining relatively high growth from 4.7 percent in 2011 to 5.2 percent in 2012. ASEAN's growth are forecast to reach 5.3-5.5 percent in 2013, with Indonesia topping the list, followed by Vietnam, the Philippines, Laos and Myanmar.

Hoang said that in recent years, ASEAN policy-makers have always looked forward to integrating their trade, finance and related institutions,into what is dubbed a "borderless ASEAN capital market."

The overarching goal of the establishment of the ASEAN Community is to create a unified manufacturing market, where the commodity,capital and human resources can be mobilized freely among member countries, Hoang added.

However, the ASEAN market of some 600 million people is only half of that of Chinese market, thus in times of global slowdown, domestic demand in China is definitely much bigger than that of the ASEAN members combined.

Furthermore, Hoang said, China, now the world's second largest economy, is one country while the ASEAN market comprises ten countries with different institutions and policies on how to attract foreign investments.

"In the coming years, China will still remain the world's top supplier in both low-technology and high-technology products," Hoang added.

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