China is a phenomenally important player in the world’s economy. The country does, of course, have a reputation as home to much of the world’s low-cost manufacturing, but this is not such an accurate reflection of its economic standing today; increasingly China is moving up the pecking order and shedding its reputation as the world’s workshop.
All of which does perhaps beg the question, where will low-value manufacturing go next?
Indonesia is one country creating a lot of interest in this regard. With a significant population, growing middle class and relatively stable government, it certainly ticks some of the required boxes, but some concerns persist, such as onerous labour regulations and weak infrastructure.
Indeed, one trend that has been noted is for certain countries to carve out certain niches. Bangladesh and Cambodia, for example, are very much establishing themselves in the textile industry.
Elsewhere, Vietnam is tipped by some to be the next stop for global supply chains, but others feel it is not living up to its potential for a number of reasons, among them a poor transportation infrastructure, political instability and high inflation.
Meanwhile, manufacturing industries in countries such as Thailand and Malaysia, both of which produce a bigger share of sophisticated goods than China (particularly electronics and car parts) could actually find themselves threatened by Chinese manufacturers moving up the value chain – and therefore into their turf.
With complex supply chains predicted to continue to fragment across multiple countries, specific industries are expected to gravitate towards countries with comparative advantages in that area.
In summary, there is no one clear successor to China, but all Southeast Asian countries together might just stand a chance.
This blog is based on an article first appearing in China Economic Review. To read the article in full, please click here or to learn more about the potential of the Asia Pacific region for your business, visit our website.