The Great Relocation: How Xi and Trump built ASEAN’s industrial future
 In the tangled web of global trade, few relationships have been as consequential - and combustible - as that between China and the United States.
Over the past decade, this axis has shaped the contours of global supply chains, dictated the flow of capital, and defined the strategic priorities of multinational corporations.
But something curious is happening. As Xi Jinping tightens his grip on China’s domestic economy and Donald Trump revives his tariff-heavy approach to trade, Chinese manufacturers are quietly packing up and moving out. And they’re not just heading to Vietnam - they’re building a new industrial frontier across Southeast Asia.
This shift, often described as the “China Plus One” strategy, began as a hedge against rising labour costs and regulatory uncertainty in China. But it has since evolved into something more profound: a structural realignment of global manufacturing, driven by fear, pragmatism, and a desire for autonomy.
Chinese entrepreneurs, once the backbone of the country’s export miracle, are increasingly wary of Beijing’s tightening control over private enterprise, capital flows, and outbound investment. The relocation of production is no longer just about cost - it’s about survival.
The numbers tell the story. In 2018, China attracted US$56.8 billion in manufacturing foreign direct investment (FDI), more than double the amount flowing into ASEAN. Fast forward to 2023, and the tables have turned. ASEAN countries received $55 billion in manufacturing FDI from OECD nations, surpassing China’s $21 billion. Indonesia alone drew $33 billion in greenfield investment, while Vietnam secured $16 billion.
This isn’t a blip - it’s a trend. ASEAN’s manufacturing FDI grew by 61 per cent in 2023, a surge that reflects both geopolitical recalibration and economic opportunity.
While Vietnam has garnered much of the spotlight, the broader ASEAN region is quietly rising. Thailand, Malaysia, Cambodia, and even the Philippines are attracting Chinese capital, building regional supply chains, and deepening intra-ASEAN trade.
In many cases, Chinese firms are setting up shop in ASEAN to export to the United States, effectively rerouting trade flows while maintaining Chinese value-add. This creates a layered dynamic: ASEAN becomes both a recipient of Chinese investment and a proxy for Sino-US trade.
But what if Trump and Xi were to strike a grand bargain? Could a detente between the two giants reverse this trend and lure Chinese manufacturers back home? Unlikely. The relocation is not just a reaction to tariffs - it’s a response to a deeper unease. Chinese capitalists are increasingly anxious to get their assets far away from Xi’s clutches. The fear is not hypothetical - it’s real, and it’s growing.
Consider the case of CK Hutchison’s Panama Canal terminals. The Hong Kong-based conglomerate sought to sell its global ports business - including strategic assets at both ends of the canal - to a consortium led by BlackRock and MSC for $22.8 billion. Beijing intervened, criticizing the deal as a betrayal of national interests and pressuring Hutchison to reconsider. The Chinese government even floated the idea of inserting a “major strategic investor” from China into the consortium, effectively reasserting control over the assets.
This episode reveals the extent to which Beijing views overseas infrastructure as a geopolitical lever - and how Chinese firms, even those based in Hong Kong, are finding it increasingly difficult to act independently.
This backdrop strengthens the argument that Chinese investment in ASEAN is not just opportunistic - it’s defensive. Entrepreneurs who’ve already relocated production to Vietnam, Indonesia, or Thailand are unlikely to rush back into Xi’s embrace. The risk calculus has changed. ASEAN offers not only cost advantages but also regulatory breathing room, political neutrality, and access to diversified markets. Even if trade tensions ease, the political climate in China remains fraught.
For ASEAN, this is a moment of opportunity - and of challenge. The region must decide whether it wants to remain a low-cost assembly hub or climb the value chain. It must invest in infrastructure, education, and innovation to sustain its industrial rise. And it must navigate the delicate balance between welcoming Chinese capital and preserving strategic autonomy.
Intra-ASEAN trade is already growing, fueled by regional supply chains and shared investment. If this trend continues, ASEAN could evolve from a “China Plus One” strategy into a self-sustaining industrial bloc. The implications are profound. ASEAN’s internal trade could begin to rival the scale and strategic importance of Sino-US trade, reshaping the global economic map and giving Southeast Asia a new voice in international affairs.
The great relocation is not just a story of factories and tariffs - it’s a story of trust, control, and the search for freedom. Chinese manufacturers are voting with their feet, and they’re choosing ASEAN. Whether this shift proves to be a temporary detour or a permanent reorientation will depend not on the whims of Trump or Xi, but on the choices made in Jakarta, Hanoi, Bangkok and Manila. |
