How friendshoring makes China more influential in ASEAN ??

The term "friendshoring" emerged in the wake of the US-China trade war, referring to the strategy of manufacturing and sourcing goods from geopolitically allied countries to reduce reliance on China. Yet, as Western nations shift their focus towards Southeast Asia for sourcing, it poses an intriguing question: Why has this trend, seemingly counterintuitive, augmented China's integration within the region? Kwangyin Liu 劉光瑩 , CommonWealth English 天下雜誌英文網 editor.

"Five years on, ASEAN a winner in U.S.-China trade war

ASEAN has emerged as a significant winner in the reshaping of the global geopolitical environment since the U.S.-China trade war erupted five years ago. It has adeptly played the big powers off against each other and benefited from restructured supply chains.

By Shu-ren Koo , Kwangyin Liu 劉光瑩 , and Silva Shih

Asia's ocean freight sector has recently launched a 'slow-boat' movement that is undercutting the convention of the past 20 years.

For decades, container ships routinely loaded goods in Shanghai, Hangzhou, Guangdong province, or another Chinese location and made a beeline from the world's factory to Western markets.

Starting 18 months ago, Evergreen's container vessels began adding a detour to the south to make a stop in Vietnamese ports such as Haiphong or Ho Chi Minh City before heading to the United States or Europe.

In the five years since former U.S. President Donald Trump initiated a trade war with China, the Association of Southeast Asian Nations (ASEAN) has unquestionably emerged as its most prominent geopolitical beneficiary, positioning itself as a much sought-after ally, courted by both Washington and Beijing.

Economically, foreign direct investment in ASEAN countries in the five years since the trade war began has risen by 33 percent compared to the previous five-year period.

The biggest investors in the latest 'ASEAN craze' have not only been Taiwanese companies that had built production hubs in China but also Chinese companies themselves.

From 2018 to 2022, companies from China and Hong Kong invested more than US$100 billion in the region, up 50 percent from the previous five years. The amount was second only to the United States and propelled China past Japan as the second-largest investor in ASEAN countries.

Change No. 1: China Moves Past Japan as ASEAN's No. 2 Investor

The competition that has played out in China between the 'red' and Taiwan supply chains has shifted to the ASEAN region as Chinese companies move capacity out of their home country to meet clients' 'China plus one' requests for more diversified supply sources.

Key players in Apple's red supply chain, including electronics manufacturer Luxshare Precision Industry Co., AirPods Goertek Inc., and lens supplier Lens Technology, have established presences in Vietnam. Multiple solar panel and wind turbine manufacturers have shifted some production to Vietnam, Thailand, and Malaysia.

Similarly, Chinese consumer brands such as Alibaba, Tencent, and Huawei, facing a saturated market and political uncertainty at home, are drawn by the growth potential of the relatively China-friendly Southeast Asian market and are developing footholds in the Indonesian, Vietnamese, and Thai markets.

Thailand has become a beachhead for China's campaign to sell its electric vehicles in foreign markets. Indonesia has attracted Chinese battery suppliers, including metal smelting companies and battery maker CATL (Contemporary Amperex Technology Co. Ltd.), which have invested in aluminum and nickel ore refineries.

In Vietnam, the new Chinese arrivals have posed a competitive challenge to Taiwanese companies operating there.

Some Taiwanese enterprises have had to deal with these Chinese-invested companies poaching their Vietnamese executives with high salaries, and others in the factory construction business have been hurt by Chinese rivals slashing prices to secure jobs.

Most Taiwanese companies expect this cutthroat competition to only intensify.

"China will become the largest investor in Southeast Asia. It's only a matter of time," said Li Mingjiang (李明江), an associate professor of international relations at Nanyang Technological University's S. Rajaratnam School of International Studies.

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