Asean surpasses China in FDI as supply shifts and costs rise: report

Southeast Asia has emerged as a more attractive destination for foreign direct investment (FDI) than China for the first time in a decade. Investors are shifting towards building “China + 1” supply chains due to increasing manufacturing costs and rising tariffs, reducing China’s competitiveness. A report by the Angsana Council, Bain & Company, and DBS Bank predicts that this trend will continue over the next 10 years, reversing the underinvestment in Southeast Asia in the past three decades.

In 2023, FDI in Southeast Asia’s top six economies surpassed that of China, with significant growth expected in the region. The report highlights the growth in key sectors like electric vehicle manufacturing, EV battery manufacturing, semiconductor manufacturing, and data center provision. To maintain this momentum, Southeast Asia needs to focus on improving service provision and innovation.

The region’s transformation reflects a global shift away from over-reliance on China. Despite China’s competitive edge in cost and innovation, Southeast Asia’s strategic investments in technology could drive further growth and innovation in the private sector.