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Seminar on "China’s Investment in ASEAN – Belt & Road and Supply Chain Shifts"

REGIONAL ECONOMIC STUDIES PROGRAMME SEMINAR

Wednesday, 04 October 2019 – ISEAS - Yusof Ishak Institute organised a seminar on “China’s Investment in ASEAN – Belt & Road and Supply Chain Shifts”, delivered by Maybank economists Ms. Lee Ju Ye and Ms. Linda Liu. The seminar was chaired by Dr. Cassey Lee and was attended by audiences from the academia and members of the public.

Ms. Lee Ju Ye (left) and Ms. Linda Liu (right), economists at Maybank Kim Eng, presented on China’s economic health and its recent investment trends across different regions. Dr. Cassey Lee (centre) moderated the session. (Credit: ISEAS - Yusof Ishak Institute)

Following the introductory remarks by Dr. Lee, Ms. Lee and Ms. Liu began their presentation by highlighting three key themes they sought to share. Before exploring them, they first gave a comprehensive overview on China’s economic health and its recent investment trends across different regions. They then revealed the fall in China’s outward direct investment to Europe, US and Oceania is caused by the increasing backlash against China’s investments and the slowdown of China’s economy.

First, Ms. Lee and Ms. Liu pointed out that China has resumed an active role at directing BRI investments into the ASEAN region. They believe the slowdown in global economic growth has forced China to take a defensive approach at making BRI investments. Using their data, they showed that there was a 100% (half year period; 1H2019) increase at China’s investment and construction contracts in the region. Surprisingly, Malaysia, which accounted for the largest share of completed BRI projects in the region, performed poorly in 1H2019. However, they expect this to change as BRI projects in Malaysia are being renegotiated to revive Chinese investments into the country.

Second, they discussed the spillover effects of US-China trade war and the benefits that are brought into the ASEAN region. One benefit is the supply chain reconfiguration where companies from China are relocating into the region to avoid the burden of tariffs. They pointed that Vietnam, Thailand and Malaysia are the major beneficiaries from this phenomenon because of their attractive domestic policies and investment incentives. They also highlighted that Indonesia appears to be losing out from this but expected them to adopt changes under the current administration. With ongoing trade tensions and stricter US immigration policies, there has been rapid growth in Chinese tourists’ arrivals in ASEAN unlike the fall in Chinese tourists’ arrival observed in the countries belonging to the ‘Five Eyes’ Alliance. This could imply a possible boom in the tourism industry in the region in the short-term.

Next, they explored China’s investments in ASEAN’s digital platform. As expected, China’s growing technology investment in ASEAN are mainly channelled into Singapore and Indonesia. However, they expect investments to flow into other ASEAN countries in the near future. On adopting Huawei’s 5G technology, they mentioned most ASEAN countries (except Vietnam) have remain broadly neutral.

The seminar concluded with Ms. Lee and Ms. Liu engaging in a question and answer session, where they shared their views on compelling issues such as the nature of investments that are moving from China to ASEAN, the motivations behind supply chain reconfiguration in ASEAN, and the absorption constraints faced by some ASEAN beneficiaries.

The seminar was attended by audiences from the academia and members of the public. (Credit: ISEAS - Yusof Ishak Institute)