Despite the current depressing economic climate, Southeast Asia continues to be very attractive for foreign direct investment (FDI), and a number of sectors appear to be on the upswing in 2023.
While China's "reopening" will provide a much-needed lift for tourism and travel starting in the second quarter, trends of capital inflow into important sectors, such as tech, manufacturing, and infrastructure development, are likely to continue (Q2 2023).
Along with the sheer size of the workforce and people in the area, Southeast Asia's expanding indigenous economies provide a lucrative environment for foreign businesses. A total of 662 million people call the ASEAN nations home, and their combined GDP is $3.2 trillion.
China has strong economic ties with ASEAN nations, and it wants to strengthen those ties by investing more in infrastructure and facilitating commerce, for example through the Regional Comprehensive Economic Partnership (RCEP).
Due to the US-China trade war and lower labor costs, many manufacturers with operations in China have been compelled to relocate some or all of their supply chains to Southeast Asia.
The ASEAN governments have implemented enabling policies and preferential incentives to take advantage of this change in regional supply networks as part of the "China Plus One" or "China Plus Many" strategies. This involves lowering taxes, making it easier to do business, increasing infrastructure expenditure, and providing incentives in free trade and special economic zone areas.
In recent years, Vietnam has benefited greatly from the China Plus One strategy, with the manufacturing industry alone bringing in about 58 percent of all FDI in 2020.
In reaction to China's increasing dominance as a manufacturing hub and a market for goods and services, some nations and businesses have chosen the "China Plus One" or "China Plus Many" strategy. By establishing a presence in nations other than China, the plan entails diversifying their production and supply chain.
The "China Plus One" or "China Plus Many" plan refers to ASEAN nations' efforts to entice foreign investment from China and other nations by presenting themselves as an alternative to or a supplement to China's manufacturing hub.
ASEAN nations seek to entice manufacturers who are looking to diversify their production base away from China by providing competitive advantages like reduced labor costs, better access to raw materials, and hospitable business environments.
Additionally, ASEAN nations work to take advantage of their close proximity to China, making them a desirable choice for companies that want to keep a presence in China while also tapping into other regional markets. The numerous free trade agreements the ASEAN nations have negotiated with China and other nations, which facilitate trade and investment flows, are also advantageous to them.
In general, the "China Plus One" or "China Plus Many" strategies are viewed as a means by which ASEAN nations can diversify their economies, lessen their dependence on China, and draw foreign investment to support their growth and development.
