Chinese money grows again in Asean as supply chains move

Vietnamese Prime Minister Nguyen Xuan Phuc (with blue tie) shakes hands with Chinese President Xi Jinping before a meeting in Beijing on April 25, 2019. As China ramps up its footprint in South-east Asia, Vietnam has drawn some small-scale greenfield investment.
JULY 18, 2019 - 12:31 PM

CHINA has ramped up its investments in South-east Asia, even as its trade war with the United States wears on and spurs a supply chain move into Asean.

Investments and construction contracts in the region recovered from a low base to hit US$11.1 billion in the first six months of 2019 - nearly twice the sum pledged in the second half of 2018.

The latest ramp-up in Asean-based project funding came against a backdrop of slowing Chinese investment in other economies, according to a new Citi report on July 17.

Recent small-scale greenfield investment plans, such as a textile plant in Indonesia and an electronics factory in Vietnam, “reflect the ongoing supply chain shifts from China to Asean,” Citi analysts Kit Wei Zheng and Ang Kai Wei said in their report.

China’s ambitious Belt and Road Initiative (BRI) investments have been tweaked to address partners’ concerns over issues such as debt sustainability and government liabilities, they wrote.

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But the report added that the BRI will not be redundant, and is in fact getting a lift from supply chain moves to Asean as US-China trade war uncertainties dim China’s lustre.

In-house Citi research from May has suggested that the capacity expansion in Asean was “mostly led by firms incorporated in China and Hong Kong”, the analysts noted.

They observed that Chinese investments in South-east Asia are “broadening into more productive sectors”, with more put into sectors such as technology and entertainment, although the traditional industries of energy, metals and transport still make up the bulk of projects.