As the West decoupling continues, will India and ASEAN become the new workshops of the world?
 Tensions have been rising between Western nations and China, with trade disputes, geopolitical tensions, and human rights concerns leading to a growing push for decoupling. This trend has been exacerbated by the news that India's population has now surpassed China's, signaling a significant shift in global power dynamics that could have significant implications for Western trade in the next five years.
There is also the role of the 10-nation ASEAN Southeast Asian bloc to consider. That would include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
The Western world, led by the United States and Europe, has long been the dominant customer in global trade, with China emerging as a major player in recent decades. However, tensions between the two sides have been escalating in recent years, with the US and Europe accusing China of unfair trade practices, intellectual property theft, and human rights abuses in Tibet, Hong Kong, and Xinjiang.
In response, the US and Europe have been taking steps to reduce their reliance on Chinese goods and services, with the US launching a trade war against China in 2018 and Europe imposing new regulations on Chinese investment and technology companies.
This trend has been termed "decoupling," as Western nations seek to reduce their economic ties with China and build up their own domestic industries, as well diversifying sources to others areas where conditions are amenable to building and maintaining efficient supply chains.
The news that India's population has now surpassed China's adds a new wrinkle to this dynamic, as it suggests that India could emerge as a new economic powerhouse in the coming years. With a population of over 1.3 billion people, India has the potential to become a major source of goods and services, made all the more suitable, by its widespread English useage. There is also hope that it will become a major market for Western goods and services, as well as a significant source of investment and technology.
However, there are also significant challenges to doing business in India, including a complex regulatory environment, bureaucratic red tape, and a lack of infrastructure in some areas. In addition, India has its own trade tensions with China, and it remains to be seen how the two countries will compete and cooperate in the coming years. But with Pakistan being closer to China, as part of Beijing's Belt and Road Initiative, and India being a member of the West's Indo-Pacific Economic Framework for Prosperity, their is little question as to where Delhi stands geopolitically.
Thus, many Western companies are already looking to India as a potential growth market. For example, Apple recently announced plans to manufacture some of its products in India, while Google has invested in Indian startups and launched new products and services tailored to the Indian market.
Meanwhile, the trend towards decoupling with China is likely to continue, as Western nations seek to reduce their dependence on a country that is increasingly seen as a strategic rival. This could lead to a shift in global supply chains, as companies look to diversify their sourcing and production away from China and towards other countries, including India.
However, there are also risks associated with this trend, such as the potential for higher costs and disruptions to supply chains. In addition, some experts have warned that decoupling could lead to a new Cold War between the US and China, with negative implications for global stability and economic growth.
In conclusion, the news that India's population has now surpassed China's is a significant development that could have major implications for Western trade in the coming years. While India presents significant opportunities as a potential growth market, there are also significant challenges to doing business in the country.
At the same time, the trend towards decoupling with China is likely to continue, which could lead to a shift in global supply chains and potentially negative consequences for global stability and growth. As such, Western nations will need to navigate these complex dynamics carefully in order to ensure a sustainable and prosperous future.
Together with India, the Association of Southeast Asian Nations (ASEAN) has emerged as a potential alternative partner for the West as they look for new trade opportunities.
The ASEAN bloc has a combined population of around 650 million people and a GDP of over $2.8 trillion. Notably, ASEAN has a rapidly growing middle class, which makes it an attractive market for Western businesses looking to expand their customer base.
Several factors make ASEAN a compelling option for the West as a trading partner. First, thanks to the Regional Comprehensive Economic Partnership (RCEP), ASEAN has a vast free trade area with several countries, including China, South Korea, Australia, and New Zealand. The agreement opens up new opportunities for Western countries to trade with ASEAN and the wider region, including the Asia-Pacific.
Secondly, ASEAN has made significant progress in liberalising its markets, encouraging foreign direct investment and reducing trade barriers. The region continues to enhance trade-related infrastructure and implement policies that support and attract foreign investment.
Thirdly, ASEAN represents a diverse and growing market with a range of consumer preferences and behaviors. By developing an understanding of the region's cultural nuances and preferences, Western brands can tailor their products and marketing strategies to appeal to ASEAN consumers.
Finally, ASEAN has a large and dynamic manufacturing sector, with some of the countries specialising in specific industries such as textiles, electronics, and automotive. Western companies can leverage the region's manufacturing capabilities to produce goods at a relatively low cost while enjoying key benefits such as advanced technology, skilled labour, and access to markets.
However, there are also some challenges associated with trading with ASEAN, such as regulatory barriers, corruption, and slow customs procedures. Moreover, some countries in the region continue to face political and social instability, which can affect the business environment and investment climate.
Yet ASEAN represents a compelling trading partner for the West if they pivot away from China as a source of manufacturing. The region has a growing middle class, liberalised trade policies, a diverse consumer market, and a dynamic manufacturing sector. Western companies must, however, navigate challenges such as regulatory barriers, corruption, and political instability to take full advantage of these opportunities. |
