Connect with us

Asean

Global value chains: risk mitigation to reduce dependence on China

Risk mitigation will lead to reduced dependence on China in global value chains, and diversification will benefit ASEAN, but localisation of production will have negative effects for ASEAN producers

Published

on

china to add 100 smart manufacturing pilot projects

Moody’s Investors Service says in a new report that shifting supply chains as countries reconfigure trade relationships following the coronavirus crisis will have mixed credit implications for the Association of Southeast Asian Nations (ASEAN).

  • Risk mitigation will lead to reduced dependence on China in global value chains
  • Diversification will benefit ASEAN, but localisation of production will have negative effects for ASEAN producers

Specifically, trade diversification is likely to favour ASEAN economies over time, while the reshoring of supply chains closer to consumer markets – especially in sectors with heightened security requirements such as pharmaceuticals – could move productive capacity away.

“We expect many governments and companies will reduce their dependence on China in global value chains moving forward, driven by the coronavirus outbreak, the China-US trade conflict, and heightened national concerns over economic security,”

Deborah Tan, a Moody’s Assistant Vice President and Analyst

“While the technological capabilities of the ASEAN region still lag those of more advanced Asian economies, particularly in electronics, a general openness to foreign direct investment and lower production costs will offer some advantages,” adds Tan.

Recent events will accelerate the offshoring of activities to ASEAN at the expense of trade with China, although an exodus of foreign companies from the Chinese markets is unlikely even as companies step up efforts to mitigate risks.

While the ASEAN economies stand to benefit from the efforts of producers to diversify their sources of supply, they will be negatively affected if reshoring trends become more pronounced.

Yet, there are three ways in which the ASEAN economies might mitigate the impact of a possible reshoring trend and the associated fragmentation of the global trading system: (1) enhancing free trade agreements with advanced economies, (2) deepening regional trade agreements, and (3) developing ASEAN further as a trading bloc in its own right. However, for the latter, ASEAN will first need to address structural challenges to harness the bloc’s full potential.

Click to comment

Leave a Reply

Vietnam

Vietnam’s Tay Ninh Province: Promising for Investors in the Greater Mekong Subregion

The SKER is one of four key economic regions which cover most economic and investment hubs in the country. The SKER consists of Tay Ninh along with Ho Chi Minh City, Binh Duong, Dong Nai, Long An, Ba Ria-Vung Tau, Binh Phuoc, and Tien Giang.

Published

on

Tay Ninh Province: Promising for Investors in the Greater Mekong Subregion

Vietnam’s Tay Ninh province located in the Southern Key Economic Region (SKER) acts as a key connection point between Ho Chi Minh City and Cambodia’s capital Phnom Penh, sharing a border with Cambodia at Moc Bai and Xa Mat border gates, the main trade centers between the two countries.

(more…)
Continue Reading

Asean

Quarantine Exemption for Vaccinated Travelers in Thailand: What You Need to Know

Published

on

Quarantine Exemption for Vaccinated Travelers in Thailand: What You Need to Know

Fully vaccinated travelers from 63 “low-risk” countries and regions can now enter Thailand without any quarantine requirements.

(more…)
Continue Reading

Recent

Most Read

Join 14,210 other subscribers