KUALA LUMPUR (April 22): The escalation of US-China trade tensions, marked by aggressive tariff measures by US President Donald Trump, is likely to reinforce Asean's attractiveness as a neutral production and investment base, according to OCBC chief economist Selena Ling.
Speaking at the bank's 2025 economic outlook session on Tuesday, Ling highlighted that the wide disparity in tariffs — with the US imposing 145% on Chinese goods versus 40% on Vietnamese ones — makes Asean countries comparatively appealing despite cost differentials.
“Does it still make sense for China to produce in Vietnam? It does,” Ling said. “And the same story goes for Malaysia, Thailand, and Indonesia — it’s all relative.”
Based on her discussions with US-based multinational corporations, Ling noted that the ongoing geopolitical rivalry between the US and China deters major long-term investments in either superpower.
This pushes global corporations to look for neutral, stable alternatives — a role Asean is well positioned to play.
“With the US and China engaged in a tit-for-tat, companies are planning for the long term and turning to neutral grounds like Asean,” she said.
Ling also expressed optimism about the "Asean Plus One" strategy — where Asean becomes the production hub serving global markets, while the US and China focus on domestic-oriented supply chains.
“Production in China will be for China, and in the US for the US. Asean will serve as neutral ground for the rest of the world,” she explained.
Strong China ties
Ling also pointed out that economic linkages between Asean and China remain robust, despite the geopolitical pressures.
She noted that a significant portion of China's core manufacturing components whether in the electric vehicle industry, electrical sector, or semiconductor space, are actively traded within Asean, and China engages in both exporting to and importing from the region.
“These trends began even before Covid-19 and the initial trade war. Chinese state-owned enterprises have been encouraged to look outward, and Asean — being in the same geographical neighbourhood — is a natural fit,” Ling said.
However, China’s slowing economy could be the major risk, Ling said.
The official 5% gross domestic product growth forecast is increasingly uncertain, which may dampen trade, foreign direct investment (FDI), and purchasing activities with Asean, Ling added.
Beyond its role as a crucial trading partner with most Asean countries, China is also a key source of inflow FDI, and plays a significant role in global wealth movements.
For example, discussions around the Johor-Singapore Special Economic Zone have emphasised the importance of attracting family offices, many of which have roots in Chinese wealth, Ling noted.