As Beijing faces intensifying U.S. tariffs, China is purposefully redirecting export flows toward ASEAN markets. During Xi Jinping’s 2025 diplomatic tour of Vietnam, Malaysia, and Cambodia, China signaled a deep strategic shift: ASEAN is no longer secondary it’s the new export frontier.
By 2023, China–ASEAN trade reached approximately $872 billion, and analysts expect even higher figures in 2025 as redirected shipments, transshipment by proxy countries, and deeper trade integration accelerate. This policy shift is as much about trade rebalancing as it is about geopolitical hedging.
Chinese infrastructure projects like the Funan Techo Canal in Cambodia and logistics hubs across Laos and Malaysia reinforce physical ties that lower transaction costs and bolster export volumes.
For ASEAN countries, this pivot is double-edged. Cheap Chinese goods flood markets to meet rising demand, but competitive pressure is squeezing local firms in textiles, appliances, and machinery.
In countries like Indonesia and Thailand, hundreds of factories have shuttered, contributing to large-scale job losses in the manufacturing sector. Governments are responding with anti-dumping duties and stronger trade defenses, but such measures risk triggering retaliatory trade friction.
How ASEAN Became China’s Export Powerhouse
The driver behind Southeast Asia’s rise as China’s export base is no accident, it’s engineered. Rising U.S. tariffs pushed Chinese intermediate and component producers to relocate to Vietnam, Thailand, Malaysia, and Indonesia, where they avoid restrictions and tap into regional value chains.
China’s intermediate goods exports to Vietnam surged 32% in the first 11 months of 2024 alone, comprising over 70% of China’s mechanical-electrical exports to the country.
These ASEAN economies offer compelling advantages: lower labor costs, pro-investment policies, and integration under trade frameworks like ACFTA and RCEP. Updates to ACFTA in 2025 will further open trade in digital and green sectors, giving Chinese firms smoother access and logistic efficiency
China has also become the dominant investor: by 2023, Chinese FDI in ASEAN manufacturing, EVs, renewable energy, and infrastructure hit $17.6 billion, more than double 2020 levels.
Malaysia, for example, is hosting major Chinese-led energy and electronics projects its electrical and electronics (E&E) sector now accounts for 40% of exports and nearly 6% of GDP, fuelled in part by Chinese component shipments and co-invested tech infrastructure. Thailand, Indonesia, and Vietnam each play similar roles in local assembly and export corridors, especially for smart devices and EV components.
These integrated networks mean that much of what appears as Chinese exports to ASEAN is being locally transformed and re-exported, sometimes even back to Western markets, evading tariffs via Vietnam-based assembly lines. ASEAN has effectively become a hybrid node, absorbing Chinese inputs and distributing finished goods globally.
The ASEAN Response: Opportunity, Risk & Sovereignty
While ASEAN nations benefit from Chinese trade and investment, they are not passive recipients. Governments increasingly wield proactive industrial policy tools to manage rising imbalances and political backlash. Vietnam, Malaysia, and Indonesia have launched anti-dumping investigations, imposed tariffs on steel, textiles, ceramics, and even restricted Chinese e‑commerce platforms like Temu.
Vietnam’s brand of “bamboo diplomacy” sensitive balancing between China and the U.S. underpins its dual-strategy: welcome Chinese investment but retain strategic independence and diversify outside China-centric dependency. Malaysia extended duties on select Chinese imports and tightened local content for EV production. Indonesia similarly raised tariffs on up to 200% for Chinese textiles and ceramics to protect SMEs.
Economists refer to the current climate as ASEAN’s “Second China Shock” a wave of rapid import penetration across sectors that strains domestic capacity and risks imported deflation and unemployment. But ASEAN is not helpless.
Policymakers are increasingly shaping engagement terms: requiring higher local content in renewable projects, revising solar tariffs, and demanding reciprocity in trade ties while leveraging ACFTA and RCEP frameworks to negotiate from strength.
China’s Economic Power VS 30 Other Asian Nations
This balancing act ensures ASEAN countries remain open to Chinese commercial benefits while asserting sovereignty and protecting local industry. Whether in the auto sector’s 40% localization rules in Thailand, or Vietnam’s solar tariff modifications favouring domestic producers, ASEAN is becoming a force in shaping, not just absorbing the terms of regional trade.
Reference:
- The Diplomat. Not Just Shock Absorbers: How ASEAN Is Shaping the China Trade Balance. https://thediplomat.com/2025/06/not-just-shock-absorbers-how-asean-is-shaping-the-china-trade-balance
- Channel News Asia. China’s Export Glut in Southeast Asia Stirs Trade Tensions. https://www.channelnewsasia.com/asia/china-export-glut-southeast-asia-trade-tensions-4770826
- Global Neighbours. Why Southeast Asia is Becoming a Manufacturing Hub for Chinese Investments. https://www.globalneighbours.org/analysis-why-southeast-asia-is-becoming-a-manufacturing-hub-for-chinese-investments
- Reuters. ASEAN Countries Face Their Own ‘China Shock’. https://www.reuters.com/markets/asia/asean-countries-face-their-own-china-shock-raychaudhuri-2025-05-15
