Supply chains moving out of China could create new winners in the Southeast Asian middle-class, says an official
Mohd Rasfan/AFP/Getty Images
- Global supply chains moving away from China is an opportunity for Southeast Asia, said one Malaysian minister.
- Southeast Asia countries could take the chance to attract manufacturing investments, he said.
- This could spur a strong middle class and consumer base in the region.
Supply chains diversifying away from China may be a problem for the country, but it could lead to bumper gains for Southeast Asian countries, a regional official said Friday.
Liew Chin Tong, the deputy minister of investment, trade, and industry in Malaysia, thinks supply chains moving to other parts of Asia isn't exactly a bad thing.
Instead, Southeast Asia has an opportunity to attract manufacturing investments that have been lagging for decades, as companies were going all in into China, he said. Liew made the comments at the Milken Institute Asia summit in Singapore.
"This diversion from China is a once-in-a-generation opportunity for Southeast Asia," said Liew.
He added it would not only create a supply hub but, in turn, a middle class that would become a strong consumer base.
As an example, Liew cited his country, Malaysia, which has been playing the "low-productivity, low-wage, and low-cost game for too long" due to the competition from China. But now, it wants to seize the opportunity, he said.
Liew's comments came amid intense global discussions on the future of supply chains following disruptions during the COVID-19 pandemic.
China's strict on-off lockdowns underscored the risks of depending heavily on the East Asian country, which has been the world's factory floor for the past four decades.
China's strict on-off lockdowns underscored the risks of depending heavily on the East Asian country, which has been the world's factory floor for the past four decades.
The developments are why the world is moving from a just-in-time to a just-in-case supply chain model, Steven Long, the general manager for Asia Pacific and Japan at Intel, said at the same Friday event. He was referring to the just-in-time strategy manufacturers use to transport materials right before they are required to be processed, which results in minimal inventory that needs to be stockpiled. This reduces storage costs.
Manufacturers are now allowing processes to have some breathing room in what's known as the "just-in-case" supply chain model because "they want resiliency" in the supply chains, Long added.
Even before the pandemic, the global supply chain started moving away from China around 2018 after President Donald Trump launched a trade war against China.
Washington-Beijing tensions are still high under the Biden administration, particularly for high-tech chips, prompting investors across the board to reconsider their business risks.
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