Last updated April 9th, 2019.


China is pumping investment into Southeast Asia. In fact, China plans to invest five times more in the ASEAN region than it does already.

Trade between China and Southeast Asia will increase to more than US$150 billion by the year 2020.

ASEAN’s ten member nations and China are very used to competing on exports and attracting foreign capital. However, the two regions found opportunities for cooperation in the transport and logistics sector.


The planned route for the high-speed rail that will link China and ASEAN.

Noel Quinn, general manager of Asia-Pacific commercial banking at HSBC in Hong Kong, says there’s synergy in manufacturing, services, and other industries.

Quinn also noted that while China exports lots of goods to ASEAN, Southeast Asia is a major exporter in its own right. “Trade flows between China and ASEAN are driven by rising regional and domestic demand”, he elaborated.

Facilitating ASEAN-China investment and trade will of course, require the proper infrastructure. Some of the larger projects between these two regions are numerous highways in addition to a high-speed rail line between Kunming, China and Singapore.

The high speed rail line will run through China, Laos, Vietnam, Cambodia, Myanmar, Thailand, Malaysia, and Singapore and should cost around US$7 billion. Similar high speed rail projects in Asia commonly run over budget though.

Rising Costs Lead to Change in China

There are several factors causing the dynamics of trade in Asia to shift. However, even more important is the rising cost of labor and manufacturing in China.

China is moving further up the value chain and making a greater number of high-tech goods. This allows countries in ASEAN such as Vietnam, Indonesia, and the Philippines to use lower costs as an advantage.

In addition, the Chinese economy is changing from one dominated by exports to one driven by its nearly 1.4 billion consumers. Most experts say this trend will continue since China’s middle-class will increase from 250 million to 600 million by 2020.

China needs to sustain an older, wealthier population at a time when they cannot produce a massive amount of goods at a lower cost than their neighbors. This means looking at regions like ASEAN and Africa which can develop their manufacturing and agricultural sectors.


Yuan’s Role in Chinese Globalization

The U.S. Dollar is fluctuating while the future of the Eurozone looks bleak. Because of all that, Chinese investment in ASEAN is boosting the yuan’s prospects of being a major international currency.

The movement of yuan into ASEAN usually goes through Singapore, the de-facto financial hub of the region. Yuan deposits in the city-state grew from US$195 billion to US$220 billion in the first quarter of 2014 alone.

Meanwhile, loans denominated in yuan increased by nearly 25% to more than US$300 billion. That’s according to data by SWIFT.

In summary, ASEAN will lead the world in adopting the yuan as a global currency. It will start using the yuan for trade settlement and financing purposes as the region’s dependence on the U.S Dollar weakens.

While Asia will benefit from increased trade and flow of capital, the western world might lose out on the region’s growth.


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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an international stock trader and property investor based in Thailand, Cambodia, and several other places. Reid manages the world's first and only frontier market real estate fund and has been featured in publications such as Forbes, Property Report, the South China Morning Post, and Seeking Alpha. You can download his free investment guide by clicking here.

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