China’s neighbours are courting American CEOs who are more willing to have their products manufactured in other regions of Southeast Asia in an attempt to take advantage of the present tensions with the US.
At the Asia Pacific Economic Cooperation (APEC) Summit in San Francisco this past week, China’s Asian rivals were actively lobbying, even as Chinese President Xi Jinping attempted to provide his own argument for why the US business community should continue doing business with him.
President Joe Biden and Chinese President Xi gathered at a resort about 35 miles away on the same day as American CEOs and officials of other Southeast Asian countries mingled inside a San Francisco conference centre.
With the Malaysian prime minister was PricewaterhouseCoopers International’s global chair. The president of the Philippines was with the CEO of Uber (UBER). Three leaders from Southeast Asia met with the CEO of Microsoft (MSFT).
There were also CEOs available for talks from firms such as GM (GM), Visa (V), Alphabet (GOOG), and ExxonMobil (XOM).
President of Indonesia Joko Widodo declared from the platform that now is the ideal moment to make investments, praising his country’s work in fields like renewable energy and electric cars. In official translation, he termed it “the right and promising choice to make.”
Stronger economic links are also being pushed for by Philippines President Ferdinand R. Marcos Jr., who stated during this week’s APEC meeting that “this opportunity to collaborate once more is light in the economic horizon in our efforts to preempt a prolonged downturn and its very negative consequences.”
Because of the US-China trade conflict, American businesses have long sought to diversify their supply networks beyond China. The COVID-19 outbreak sped up such conversations as factories and ports in China closed, making it impossible for businesses to export goods out of the second-biggest economy in the world.
Due to the ambiguity surrounding the Chinese economy and the geopolitical situation, more businesses are now thinking about making such a move.
This past week, the Biden administration strongly endorsed the diversification plan. Treasury Secretary Janet Yellen urged businesses to consider “friend-shoring,” or concentrating on nations who are reliable trading partners.
According to Shehzad Qazi, executive director of China Beige Book, “there is no doubt that these other Southeast Asian countries are going to be making a strong pitch for why they need to be added to the supply chain basket.”
“I think the question that the CEOs and their staff will be wondering about continuously is, do these other countries have the capacity to become big players.”
The shift to renewable energy and digital manufacturing, according to experts, present the greatest prospects for companies looking to expand into Asian nations outside of China.
In India, it has already taken place. For businesses like Tesla (TSLA) and Apple (AAPL), which has long depended on Chinese manufacturers for its iPhone components, that nation has emerged as a significant alternative to China. India is not an APEC member.
According to Nicholas Lardy, a specialist in Chinese economics at the Peterson Institute for International Economics, Vietnam is positioning itself as a middleman in an attempt to profit from both China and the US.
Chinese companies “are producing things [in Vietnam] and selling them into the US and avoiding the tariffs,” he writes. “So this is a workaround.”
However, Lardy and Rhodium Group Director Reva Goujon both note that the West may wind up suffering as a result of these intricate arrangements.
“It’s kind of ironic because the US is trying to pull these countries into our orbit and reduce their dependence on China, but their dependence on China is actually growing,” Lardy says.
This past week, the president of China launched his own charm assault.
He attempted to reassure the CEOs in attendance at a dinner on Wednesday night, which included FedEx CEO Raj Subramaniam, Boeing Commercial Aeroplanes CEO Stan Deal, and Apple CEO Tim Cook, by implying that his political restrictions would be less stringent moving ahead.
Along with his panda diplomacy, he hinted that the National Zoo in Washington, D.C. would be getting new bears after the previous ones were sent back to the PRC earlier this year.
Furthermore, Xi made a clear reference to the growing rivalry between his neighbours in a second written statement when he said that “China has become a synonym of the best investment destination, and that the ‘next China’ is still China.”
“Decoupling and supply-chain disruption are not in anyone’s interests,” he stated.
In the coming months and years, China may potentially profit from the difficult attempts to establish a trading framework throughout the Asian region.
At a luncheon on Wednesday that was attended by Xi and CEOs, Commerce Secretary Gina Raimondo recognised that many American companies were still very interested in China.