Opportunities for Vietnam from disrupted China-ASEAN ties

Invest Asia 2019 opened in Singapore today with discussions on the disrupted China - ASEAN supply chain

As the trade conflict between the US and China drag on, ASEAN markets find themselves caught in between their two biggest trading partners. One of the greatest impacts is the ongoing manufacturing shift away from China to the ASEAN, most notably in consumer goods, technology, and automotive. A 2018 survey by Maybank pointed out that at least 20 per cent China-based manufacturers are thinking of moving their assembly lines to the ASEAN.

“The conflict has cast serious doubts on the future of global economic activity, and against the backdrop of this fragmented global environment, countries, especially those in Asia, have started sliding into new regional arrangements,” said Datuk Abdul Farid Alias, group president and CEO of Maybank, as he opened the Invest Asia 2019 conference in Singapore this morning.

More than 240 fund managers among 1,000 participants came to Invest Asia 2019

The conference, which was previously called Invest ASEAN, this year welcomed Industrial and Commercial Bank of China (ICBC) as its partner. ICBC is China’s biggest bank and also the world’s largest bank by total assets, deposits, loans, number of customers, and number of employees.

This is the first time the Chinese financial giant co-hosts a conference in the ASEAN. According to the organisers, the initiative clearly showcases China’s desire to strengthen business ties with the ASEAN amidst its trade spat with the US.

During the opening session on China-ASEAN trade relations, Dr Chua Hak Bin, Maybank Kim Eng’s regional economist, highlighted that Vietnam is set to be the biggest beneficiary from the regional production shift.

“Vietnam is more integrated into the global electronics value chain, and hence more vulnerable to any weakening global electronics demand and escalation in US-China trade tensions. Vietnam, however, appears to be benefiting from potential diversion of trade due to higher US tariffs imposed on Chinese goods,” said Bin.

Experts at Invest Asia 2019 were excited about Vietnam's prospects in the global trade war

Reports show that Vietnam’s exports to teh US have been surging in recent months, particularly by 26 per cent in February and 42 per cent in January compared to the 17.5 per cent in the last quarter of 2018. The pickup is particularly strong for goods that were hit by the US-China tariffs.

Dr Simon Ogus, CEO of consultancy firm DSG Asia, said that even if only 5 per cent of manufacturers from China move to the ASEAN, the impact on the region would already be substantial. Ogus emphasised that the production move already began to take place before the trade war, and global trade conflicts only accelerated the process.

Invest Asia 2019 hosted over 240 fund managers among 1,000 delegates from across Asia, the UK, and the US, with the total estimated assets under management of $11 trillion. Major topics are sustainability investing, trade disruptions, the upcoming 5G value chain, and the next phase of ASEAN tourism.

At the same time, 51 Asian companies (four of which are from Vietnam) with the combined market capitalisation of $413 billion will also meet with potential investors.

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