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OpinionSoutheast Asia must write its own trade rules for China’s ‘flying geese’
As Chinese manufacturers migrate south, Asean has the leverage to dictate terms on local sourcing and skills training
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Southeast Asia has been thrust into the crosshairs of geopolitical competition these past few tumultuous years, necessitating choices about how to handle the movement of economic activity emanating from China.
This movement is not entirely new. Roughly a decade after China’s accession to the World Trade Organization solidified its status as the “world’s factory”, wages in the country began rising – a natural consequence of improving living standards and greater competition for increasingly skilled workers.
Southeast Asia became the first port of call for global companies that had relied on China as a production base, as well as for Chinese contract manufacturers themselves, who – like the Japanese and Taiwanese companies before them – sought comfort in geographic and cultural proximity as they competed on cost.
Myanmar’s modest opening, Vietnam’s accelerating reforms and the political stability – albeit deeply authoritarian – of Laos and Cambodia all proved attractive, in what many saw as the latest iteration of the “flying geese” model of shifting production, by which anchor firms lead suppliers to new production bases, flying in V-formation towards greater efficiency.
What has happened over the past decade, however, is different from this market-driven migration. The flock has kept flying, certainly, but now in pursuit of resilience rather than efficiency.
A succession of seismic shocks – Donald Trump’s initiation of a trade war in 2018, the Covid-19 pandemic and China’s debilitating lockdowns, mounting security concerns over increasingly digitised and “weaponisable” goods, and Beijing’s full-scale tilt towards indigenous innovation and preferencing domestic firms – all fuelled governments’ desire, and firms’ need, to diversify production and avoid tariffs, scrutiny, risks or all three.
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