# ASEAN Surpasses China in Manufacturing Foreign Direct Investment (FDI)

- Link: https://www.thailand-business-news.com/asean/137691-asean-surpasses-china-in-manufacturing-foreign-direct-investment-fdi
- Published: 2024-04-25T09:07:00+07:00
- Author: Olivier Languepin

The Association of South-East Asian Nations (Asean), which has become a key target
of manufacturing investment for multinationals due to diversification from China
and geopolitical dynamics.

## Key Takeaways

 * ASEAN has become a major destination for manufacturing investment, surpassing
   China as the top choice for OECD countries in 2022 and 2023.
 * The five largest ASEAN economies – Indonesia, Thailand, Singapore, Vietnam, and
   Malaysia – attracted the majority of manufacturing FDI, with China also significantly
   increasing its investment in the region.
 * Geopolitical tensions and trade restrictions are driving politically motivated
   FDI trends in strategic sectors like electric vehicles, semiconductors, and critical
   minerals within ASEAN.

The region attracted significant foreign direct investment (FDI), particularly in
countries like Indonesia, Thailand, Singapore, Vietnam, and Malaysia. Asean has 
overtaken China as the top destination for manufacturing investment from OECD countries.

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In 2022 and 2023, over 124 billion dollars have been pledged to new foreign direct
investment (FDI) manufacturing projects in Southeast Asia, according to[ fDi Itelligence](https://www.fdiintelligence.com/).
This comes as countries in the region move past pandemic-related restrictions and
emerge as natural destinations for projects that would have likely been based in
China in the past.

The rise in investment is driven by supply chain diversification, accelerated by
the Covid-19 pandemic and geopolitical tensions. Chinese FDI in Asean has also significantly
increased, driven by strong diplomatic ties and diaspora connections. The FDI trends
are politically driven, reflecting heightened global competition and interest in
trade and investment in the region.

The five largest ASEAN economies – Indonesia, Thailand, Singapore, Vietnam, and 
Malaysia – accounted for 96.5% of the manufacturing FDI pledged to the region in
2022 and 2023.

Not only Western multinationals have increased their investment in ASEAN, but also
a third of the region’s manufacturing FDI in 2023 came from China, which is an increase
from 18.5% before the pandemic in 2019. Chinese investment exceeded that from other
major source markets such as the US, South Korea, and Japan, according to fDi Markets.

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Malaysia has attracted substantial semiconductor investments from Western firms,
as well as Chinese companies like Shenzhen HFC. Thailand has also drawn in Chinese
electric vehicle (EV) makers such as SAIC and BYD. Meanwhile, Indonesia has been
a major beneficiary of increased Chinese investment, particularly in metals like
aluminum and nickel, as well as the broader EV supply chain.

This shift in foreign direct investment (FDI) signifies a noteworthy transformation
in the worldwide manufacturing industry. ASEAN is now emerging as a major player,
fueled by government interests amidst heightened geopolitical tensions and trade
restrictions in strategic sectors.