With China’s wages rising rapidly over time and recent trade tensions prompting supply chain rejigging, ASEAN – with Vietnam leading the pack, is now recapturing its competitive niche as the Asia’s export powerhouse, according to HSBC’s latest report.
Since the global financial crisis, the gap between the two has again narrowed, until ASEAN started pulling ahead in from 2016 onwards with the US – China trade tension and rising wage in China.
There are plenty of factors, of course, that determine an economy’s competitiveness: the real exchange rate, quality of infrastructure, regulatory environment, among others, but wages, too, are part of the mix. And in the last few years alone, with Chinese workers’ income continuing to soar, the gap with Southeast Asia has continued to widen.
Among ASEAN countries, Vietnam leads the way, with Malaysia and Thailand pulling up as well. Despite its boom in recent years, its wages remain hugely competitive. Additionally, between 2012 and 2017, in a mere five years, Malaysia and Thailand have seen a huge increase in their competitiveness, with wages in the latter now about 25% below China’s.
As ASEAN’s exports are booming, foreign direct investment into the region has picked up noticeably. Based on the report’s estimation, last year was the first time since 1991 that FDI inflows into ASEAN exceeded those into China.
