Due to the continuous deterioration of the political and economic environment in China, coupled with changes in geopolitical dynamics, a large amount of foreign capital has been withdrawn from China and redirected towards Southeast Asia. Recently, tech giants such as Apple and Microsoft have been visiting Southeast Asia, pledging to invest billions of dollars in the region.
In the past few months, industry giants like Apple, Microsoft, and Nvidia have visited Southeast Asia, meeting with leaders of countries such as Indonesia, Malaysia, and Thailand, and presenting massive investment plans.
Earlier this month, Microsoft CEO Satya Nadella announced a $2.2 billion investment in Malaysia for cloud computing and artificial intelligence infrastructure development, marking Microsoft’s largest single investment in Malaysia in 32 years.
One of the top five American tech companies, Amazon, announced on May 7th a plan to add an additional $9 billion in investment to Singapore over the next four years to expand its cloud computing infrastructure.
Apple has seen a decline in sales in China. In April, Apple CEO Tim Cook visited Vietnam, Indonesia, and Singapore, meeting with national leaders to announce new investments. Apple reported that despite a global decrease in total sales, revenue in Indonesia reached a historic high.
Nvidia has plans to invest in countries like Vietnam and Malaysia. In 2023, Nvidia reached an agreement with YTL Power International in Malaysia to help introduce the fastest supercomputer manufactured by Nvidia’s YTL subsidiary in mid-2024.
On March 19th, YTL Power announced that they will install the world’s fastest supercomputer powered by Nvidia’s Grace Blackwell superchip, the DGX Cloud, in Johor, Malaysia.
Southeast Asia has a total population of 678 million, making it one of the regions with the highest net population growth, particularly among young people.
In recent years, the younger generation in Southeast Asia has shown a strong interest in video streaming, online shopping, and other internet-related services. Several media outlets have cited estimates from companies like Google, Temasek, and Bain predicting that the local internet-related service market will more than double in size to $600 billion.
Southeast Asia also boasts a significant electronics industry and online service market. It is estimated that by 2030, around 65% of Southeast Asians will enter the middle class, resulting in increased purchasing power.
Economic analyst Wu Jialong from Taiwan’s macroeconomic perspective analyzed the reasons for the shift of global investment focus to Southeast Asia in four aspects.
He stated, “From a geopolitical perspective, China has always viewed Southeast Asia as its backyard, its territory. Aside from wanting to reunify Taiwan militarily, China also aims to control Southeast Asia and the South China Sea. Therefore, the United States aims to win over Southeast Asia, control the South China Sea, and restrain China. Southeast Asia will inevitably become a key region of contention between the United States and China.”
Secondly, Wu highlighted the demographic dividend. China previously benefited from a significant demographic dividend, but in recent years, the birth rate has been declining, exacerbated by the loss of lives during the three-year pandemic. In contrast, the total population of Southeast Asia has neared that of China’s population. “In terms of population structure, these can also be considered as Southeast Asia’s demographic dividend, as they can compete with China’s labor force. This is the second reason,” he explained.
“Thirdly, if these Southeast Asian countries develop their middle class by attracting manufacturing from China, bypassing the middle-income trap, the region’s economic output could challenge and surpass China. Although not currently, there is potential for this in the future,” Wu added.
“Fourthly, from an economic perspective, with Japan likely to increase investment in Southeast Asia under U.S. leadership, Korea has already seen this trend, with Samsung making significant investments in Vietnam. Initially joined by Taiwan, along with Europe and the U.S., there is currently a wave of investment in Southeast Asia. One direct intention is to swiftly replace the vacancies left by companies withdrawing from China in manufacturing and supply chain sectors,” Wu elaborated.
Located in Southeastern Asia, Southeast Asia is composed of multiple countries and regions bordering China to the south, India to the east, New Guinea to the west, and Australia to the north. It includes 11 countries such as Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Cambodia, and Indonesia. The region encompasses mainland southern China, Taiwan, the Philippine archipelago, the Malay archipelago, and the Indochinese Peninsula surrounding the South China Sea.
Southeast Asia’s geopolitical value and the region’s increasing activity have elevated its position in the international strategic landscape, becoming a focal point for competition in economics, military, and resources. China has openly expressed its ambitions to control Southeast Asia, using the Belt and Road Initiative to engage with countries and spread its ideology. However, as the world’s strategic landscape shifts towards confrontation between the U.S. and China and global containment of China, the Communist Party faces multiple challenges.
The United States leads global capital investment projects in Southeast Asia, investing $74.3 billion in 2018–2022 to construct factories and other projects. Following closely behind, China invested as much as $68.5 billion during the same period.
However, Wu believes that China does not hold an advantageous position in its competition in Southeast Asia. “China has lost its low- to mid-range manufacturing, and its high-end manufacturing lacks independent technology, so it must aggressively seek to acquire U.S. technology. If it can’t, its high-end sector won’t progress, while the low- to mid-range products will shift to Southeast Asia quickly. China is currently trying to transfer some low-end products to Southeast Asia for cheap exports, but Southeast Asian countries may soon not need these Chinese export products as they can produce their own,” Wu stated.
Wu pointed out that there are substantive differences between China and the U.S. and Japan in their operations in Southeast Asia from an economic and geopolitical perspective, and China faces challenges in fierce competition.
He stated, “Both China and Southeast Asia have export-oriented economies that compete for the same export markets, making them rivals. One important purpose of China’s investments is to evade U.S. tariffs by converting production locations to Southeast Asian countries. Therefore, Southeast Asian countries are more willing to accept investments from Japan, Taiwan, South Korea, the United States, and Europe. This is a disadvantage for China.”
In previous years, China relied on foreign funding and technology for rapid economic growth, while Southeast Asian countries lagged behind. “However, now manufacturing has shifted to Southeast Asia. At this time, Southeast Asia has to choose between the U.S. and Japan because technology, capital, and orders all come from the U.S. or Japan. China is coming to compete and snatch orders,” Wu explained.
Southeast Asia lies adjacent to the South China Sea, which holds strategic importance. China’s aggressive actions in the South China Sea, continuously stirring up conflicts and intensifying tensions with neighboring countries, have elicited displeasure from various countries. In the past, Southeast Asian countries understood that they were not a match for China due to its overwhelming strength, and they could only follow China’s lead. “With the involvement of the U.S. and Japan, Southeast Asian countries will gradually move away from China and gravitate towards the U.S. and Japan. They have already begun shifting their allegiance from China to the U.S. and Japan. This is the overall environment,” Wu emphasized.
In recent years, conflicts revolving around sovereignty in the South China Sea have escalated continuously. The South China Sea has also become a crucial element in the U.S.’s containment strategy against China.
Wu stated, “The U.S. views the South China Sea as a strategic region, and Australia will also participate. Operating in Southeast Asia is also a message to Australia and Taiwan that the U.S. is committed to staying in East Asia and will not withdraw from the region. Southeast Asian countries also aspire to achieve economic development, maintain freedom of navigation in the South China Sea, and prevent Chinese control.”
With the global investment focus shifting towards Southeast Asia, the region is poised to become a hotbed of economic growth, innovation, and strategic competition in the coming years.