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ASEAN economy surpasses China   [Copy link] 中文

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Post time 2014-5-23 19:28:47 |Display all floors
ASEAN Finally Surpasses China in Foreign Direct Investment

FDI to ASEAN-5 surpassed FDI to China in 2013

China FDI refers to FDI utilized; Indonesia FDI refers to foreign investment realization; Philippines & Thailand FDI refers to FDI approved. Malaysia and Singapore FDI data on BOP basis. 2013 FDI data for Philippines is BofAML estimate. Sources: BofA Merrill Lynch Global Research estimates, CEIC

In a report, Bank America points to three reasons for the trend:

  • more favorable ASEAN demographics versus an ageing China (with a labor force which is starting to shrink)

  • rising wage differences (higher wage growth in China compounded by a stronger RMB)

  • a fast growing ASEAN domestic market

China is also starting to emerge as an outward FDI investor given its growing savings and wealth, the report added.

Remarkable surge
Among the ASEAN-5, the Philippines experienced a “remarkable surge in FDI” – 188% increase in the first three quarters of 2013. Super typhoon Haiyan may have hurt FDI in the fourth quarter, however, so Bank of America estimates full-year growth at 24%.

That is still stronger than FDI expansion in Malaysia (+19%), Indonesia (+17%) and Singapore (+5%). But political uncertainty and social unrest in Thailand weakened FDI, which Bank of America says shrank by 12% from 2012.

“FDI has been a bright spot in Indonesia despite current-account deficit concerns last year,” says the report. “A large domestic market (population: 250 million), low relative wages (despite minimum wage hike) and a weak rupiah may be helping to lure foreign investment.”

“Malaysia seems to be succeeding in attracting FDI as part of its transformation drive, with more than a third going into its manufacturing sector in 2013,” the report adds. “Singapore as a FDI investment destination may be hampered by the current restructuring and stricter foreign worker policy.”

The “structural forces” that are making China less attractive for foreign direct investment are likely to persist, Bank of America concludes. Manufacturing wages in China continue to outpace levels in ASEAN, for example, particularly against Indonesia, Vietnam and the Philippines.

Sources: BofA Merrill Lynch Global Research estimates, CEIC

“Less favorable demographics in China (because of the one-child policy), stronger GDP growth and a steadily appreciating RMB has widened the wage gap with ASEAN,” says the report.

The Japan factor
One other driver is Japanese investment. While Japan’s FDI into ASEAN declined 3.2% in 2013 after jumping 26% in 2012, a larger share of the inflow now go to Southeast Asia compared to the inflow to China. “Escalating geopolitical tensions between Japan and China are driving this material shift,” reckons the report.

Based on FDI utilized for China; foreign investment realized in Indonesia; FDI approved in Thailand and Philippines; and BoP FDI inflows for Malaysia and Singapore. Sources: BofA Merrill Lynch Global Research estimates, CEIC

In ASEAN, Japanese investment interest is growing strongest in Singapore (up 111%). Some analysts ascribe the increase possibly to anticipation of fuller ASEAN integration on 1 January 2015, when Cambodia, Laos, Myanmar and Vietnam join the ASEAN-5 in cancelling import and export duty taxes on goods and services traded among the ten ASEAN members. The exemption is based on geography. Despite its tight labor market and escalating costs, Singapore has made sure that setting up a business in its territory is far easier than anywhere else in ASEAN.

Japanese investment into Indonesia also grew strongly at 92%. But interest in Vietnam (minus-68%) and Thailand (minus-21%) waned last year. Overall, concludes the Bank of America report, “rising FDI into ASEAN will likely remain a favorable structural trend over the next few years given favorable demographics, competitive wages and geopolitical competition between the superpowers (which remain the major investors).”

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Post time 2014-5-23 22:20:16 |Display all floors

China is isolating herself

China absence casts shadow on WEF

[size=0.8em]Philippines Ambassador to China Erlinda Basilio, left, is greeted by Chinese President Xi Jinping before the opening ceremony at the fourth Conference on Interaction and Confidence Building Measures in Asia summit in Shanghai, China, on Wednesday, May 21, 2014. China’s absence in Manila has cast a shadow on the ongoing World Economic Forum on East Asia being hosted by the Philippines. The little-known security forum in Shanghai is seen to be China’s platform to show its willingness to work with her wary neighbors. AP PHOTO/MARK RALSTON

MANILA, Philippines—Several of Asia’s most powerful men and women are converging in Metro Manila this week to take part in discussions that will help shape the region’s future, but a giant dragon is casting a shadow on one of the continent’s brightest spots.

For participants to this year’s World Economic Form (WEF) on East Asia—being held in the Philippines for the first time as a reflection of the country’s rising prominence—one glaring no-show cannot be ignored: China’s.

“Their absence is noticeable for me. They aren’t present in any big way,” said Rajiv Biswas, chief economist for the Asia-Pacific at IHS, a US-based think tank. “There are a couple of [Chinese] companies here, but it’s not a substantial presence,” he said in an interview Tuesday night.

China’s snub, he said, might serve as a harbinger of worse things to come. The largest economy in Asia—and the world’s by 2021, according to IHS—ironically may also become the continent’s biggest hurdle to development.

Biswas said geopolitical risks as a result of territorial disputes between China and several of its neighbors, the Philippines included, clouded the WEF agenda.

China has claimed “indisputable sovereignty” over most of South China Sea (locally called the West Philippine Sea), including areas the Philippines, Vietnam, Indonesia and Malaysia, among others, say are theirs.

Top agenda

Already, the issue of China was on top of the agenda at the scheduled meeting this week between President Aquino and Vietnam’s Prime Minister Nguyen Tan Dung, who is in town this week for the WEF.

Earlier this month, state-owned China National Offshore Oil Corp. (CNOOC) placed a deep sea drilling rig in an area both Beijing and Hanoi claim as theirs. This triggered violent anti-Chinese demonstrations in Vietnam that have left two Chinese workers dead and factories damaged.

Tensions between China and the Philippines in recent months have also continued to rise. Last week, Foreign Affairs Secretary Albert del Rosario accused Beijing of violating international laws for its extensive reclamation work on Mabini Reef—an area claimed by the Philippines.

The Philippines last March brought China to court, questioning the validity of the latter’s Nine-Dash Line claim before the United Nations.

Meanwhile, Japan, according to reports this week, said it would set up military posts on the Senkaku Islets that are also claimed by China.

“China is the common denominator in these issues,” Biswas said.

Several countries have started to feel the pinch. China’s General Administration of Customs said in January that bilateral trade with Japan fell 5.1 percent last year to $312.55 billion. Chinese exports to Japan dropped nearly 1 percent, while Japanese exports to China fell by almost a tenth.

The year before, trade between Asia’s two largest economies dipped 3.9 percent.

China’s importance to the region as a whole cannot be understated. In 2012, foreign direct investments to Asean from China reached $4.34 billion, or 6.7 percent of the total. China’s share of Asean’s total trade was 12.9 percent, beating Japan, the European Union and the United States. In the same year, 9.2 million Chinese tourists visited Asean countries, making them the region’s largest market for visitors.

In Vietnam, Biswas said investments from China were expected to dip as its companies mirrored Beijing’s more assertive stand. Vietnam’s tourism sector, one of the main drivers of its economy, is also expected to take a hit. Last year, 1.9 million of Vietnam’s 7.5 million tourists were from China, official data showed.

In 2012, the travel and tourism industry employed 3.8 percent of Vietnam’s workforce. Including wider effects from investments and the supply chain, the proportion grows to 8.1 percent.

China’s tourism administration this month issued a travel warning for its people, saying visits to Vietnam should be “carefully considered.” The warning also called on Chinese tourists to “raise their consciousness of danger,” according to a report by Singapore’s Straits Times.

The Vietnam National Administration of Tourism (VNAT) has already pledged to help protect Chinese tourists amid rising tensions. “People in Vietnam wouldn’t want to go to China. It’s the same with the Chinese. They wouldn’t want to visit Vietnam,” Biswas said.

Asean-China spats

Spats between China and several members of the Asean come ahead of the 10-nation bloc’s aspiration to integrate into a single economic unit starting next year.

Biswas said Asean’s relationship with China was vital if East Asia as a whole was to achieve the economic gains it sorely needed to lift millions of its citizens still mired in poverty.

The opportunities for economic cooperation between the increasingly important Asean bloc and its larger neighbor were immense, policymakers said.

If taken as a single country, the Asean bloc is the third-largest in the world in terms of population with more than 600 million people—dwarfed only by China’s 1.35 billion and India’s 1.24 billion.

Finance Secretary Cesar V. Purisima earlier this week noted that Asean was one of the world’s fastest-growing regions. In 2012, the region’s $2-trillion economy grew by 5.8 percent, accelerating from 2011’s 4.8 percent. In the same years, the global economy expanded by just 2.9 and 3.9 percent, respectively.

In 2013, Asean’s 10 members were able to attract more foreign direct investments (FDI) than China for the first time in history, Purisima noted.

The region also leads the world in several areas. Asean is the world’s top exporter of electronics and the second-largest manufacturer of garments next to China. The 10 countries also attracted more foreign visitors than France, the world’s leader in tourism.

“Asean’s potential is clearly there,” Purisima said at the Financial Times-First Metro Investments Corp. (FMIC) Investments Summit in Makati City.

China’s peace dividend

International Monetary Fund (IMF) deputy managing director Naoyuki Shinohara said Asean, strong as it is, stood to gain even more if harmony with China could be attained.


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Post time 2014-5-23 23:10:23 |Display all floors
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Post time 2014-5-23 23:16:06 |Display all floors
BigWang Post time: 2014-5-23 23:10
China wants to get rid of FDI.

They are No good.

FDI was the jump start to China's rise !

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Post time 2014-5-23 23:22:23 |Display all floors
Business people should be aware that Philippines us the unsafest country on the planet and not a place to go; today 2 Chinese business women were kidnapped there!

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Post time 2014-5-23 23:26:55 |Display all floors
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Post time 2014-5-23 23:28:06 |Display all floors
longzhou Post time: 2014-5-23 23:22
Business people should be aware that Philippines us the unsafest country on the planet and not a pla ...

Business people do not need your advice, they have their own brain to decide.

And they have decided already.

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