Asean FDI outpaces China for first time in decade amid supply shifts, rising costs: report

For the first time in a decade, Southeast Asia has attracted more foreign direct investment (FDI) than China as investors shift faster towards building “China + 1” supply chains amid increasing manufacturing costs and rising tariffs that have reduced Beijing’s competitiveness.

That is according to a new report on the state of investments in the region released by the Angsana Council, Bain & Company, and DBS Bank on Thursday. The report forecasts that the growth in foreign investments in Southeast Asia will continue to outpace China’s over the next 10 years, reversing the underinvestment in the region in the past three decades. Much of those lost investments had gone to China.

In 2023, foreign direct investments in Southeast Asia’s top six economies (SEA-6) – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – reached US$206 billion, compared with US$43 billion for China, according to the report, titled “Navigating High Winds: Southeast Asia Outlook 2024-2034”.

Between 2018 and 2022, FDI in SEA-6 grew by 37 per cent while in China, FDI grew 10 per cent, the report found.

“As a result of strong domestic growth and the China +1 strategy, we are increasingly optimistic that Southeast Asia will outpace China’s growth in both GDP and FDI in the next decade,” said Charles Ormiston, Advisory Partner at Bain & Company and Chair of Angsana Council.

“However, multinational investments will be highly contested, with the competition between countries improving outcomes for both businesses and consumers.”

FDI is also growing quickly in India and faster than China in the last decade, but it still lags behind the FDI growth and size in Southeast Asia.

Among the SEA-6, Singapore holds the top spot with the highest amount of