top of page

Southeast Asia Top Choice For Firms Diversifying Supply Chains Amid U.S.-China Tensions

Southeast Asia has swiftly become a prime beneficiary of the "China Plus One" strategy, a business approach aimed at mitigating the risks of complete dependence on China's market or supply chain. While companies continue to maintain a foothold in China, they are increasingly diversifying their manufacturing operations by expanding into other countries, notably Vietnam and Indonesia.

Southeast Asia has emerged as a top choice for firms looking to diversify production away from China, including Chinese companies, amid escalating tensions between Washington and Beijing.

"Southeast Asia is well-placed to benefit significantly from the China+1 phenomenon as both foreign and Chinese companies diversify their supply chains and operations," said Kuo-Yi Lim, co-founder and managing partner of Southeast Asian venture capital firm Monk's Hill Ventures.

"Geopolitical [tensions have] accelerated these activities, which started during the Covid lockdowns," Lim added.

The "China Plus One" strategy seeks to reduce the risks associated with total reliance on China's market or supply chain through diversifying manufacturing operations, and expanding into other countries even as companies maintain a presence in China.

This has spurred greater investments into the ASEAN bloc. Foreign direct investments into the ASEAN economies of Indonesia, Malaysia, Philippines, Thailand, Singapore and Vietnam rose to $236 billion in 2023 compared with an annual average of $190 billion between 2020 and 2022, OCBC economists said in a May report. The inflows mostly came from the U.S., Japan, European Union as well as Mainland China & Hong Kong.

Southeast Asia Top Choice For Firms Diversifying Supply Chains
Southeast Asia Top Choice For Firms Diversifying Supply Chains


bottom of page