China's Changing Impact On Regional Manufacturing
BMI View: China's endeavours to revamp its industrial structure and will be the primary driving force shaping Asia's manufacturing landscape going forward. Northeast Asian economies stand to be the most adversely affected, with Taiwan likely to be hit hardest as a result of its recent stagnation in the tech sector. Although we expect to see a shift of production facilities out of China and into cheaper neighbouring locales within Southeast Asia, we do not expect a complete exodus of low-cost manufacturing out of the country as businesses increasingly adopt the 'China-plus-one' strategy.
Asia's role within the global manufacturing industry has witnessed a sea-change over the last few decades. Led by Japan post-World War II and followed by the Asian Tigers (South Korea, Taiwan, Singapore and Hong Kong) in the 1960s and 1970s, its rapid transformation from the manufacturing of predominantly textiles and other low-order goods to higher-end goods presently has enabled a number of East Asia economies to become some of the most developed and wealthiest countries in the world. While adopting different paths towards industrialisation, the main thrust behind Asia's move up the global manufacturing chain was the region's progressively greater openness to international trade and thirst for foreign direct investment as a means to speed up economic development from their nascent stages.
With regional economic development presently more divergent, the fundamental forces driving the change in the region's industrial structure are now less endogenous and instead more influenced by external factors. The most salient external influence in our view is that of China's economic restructuring efforts.
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|Asia - GDP Per Capita, US$|