Trade disruptions from China’s lockdowns and the war in Ukraine are seen doing for Southeast Asia what the US’s spat with Beijing couldn’t meaningfully do -- redistribute supply chains.

“Much of the discussion around dependency on China has been linked to the US-China rivalry,” according to a report by Hinrich Foundation. But the latest “disruptions have broadened the number of countries currently assessing the risks to their supplies.”

This time around, Japan and European Union members are looking to secure supply linkages without increasing cost, wrote Stewart Paterson, the report’s author and research fellow at the Asia-based foundation set up by US entrepreneur Merle Hinrich to promote sustainable global trade.

The EU and Japan each account for about 12% of total direct investment flows into Southeast Asia for the last five years, compared to China’s 8% share, the report noted. With a per capita GDP of $4,500, the Association of Southeast Asian Nations -- the 10-member bloc -- is also a “far less costly source of labor than China,” Paterson wrote.

Another reason that sets apart the US-led efforts earlier to reduce dependence on China from what’s happening now is the relation between the state and the companies, he said. Unlike in the US where multinational corporations are “notoriously independent” from government-set agendas, the linkages run much deeper in the EU and Japan.

“The passing of Japan’s new Economic Security Law and the EU’s Global Gateway policy are the most recent manifestations of close government-corporate cooperation in industrial policy,” Paterson said.

Source:
courtesy of BLOOMBERG

by Xiao Zibang

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