Chinese FDI into ASEAN is associated with higher imports of machinery, capital goods and upstream inputs from China. At ACI’s webinar, Dr Jingting Liu examined whether this reflects only tariff circumvention and trade rerouting, or whether production is also moving into the region.

The evidence points to production moving alongside investment. Export controls appear to have increased Chinese outward FDI, especially in strategic and manufacturing-related sectors such as EVs, batteries, semiconductors, electronics, motor vehicles and printed circuit boards. In ASEAN, industries receiving Chinese FDI are also importing more of the equipment and inputs used to build and run production.

Vietnam and Indonesia show the clearest increase in production-related imports from China. The findings suggest that Chinese investment is not only linked to goods being routed through ASEAN, but also to stronger production activity in parts of the region, while keeping recipient industries closely tied to Chinese suppliers.

Key Highlights:

1. Chinese FDI into ASEAN has shifted toward strategic industries. Since 2020, investment has become more concentrated in EVs, batteries, semiconductors, electronics, motor vehicles and printed circuit boards.

2. Export controls are pushing Chinese firms abroad. Industries first exposed to export controls, which disproportionately target strategic sectors, saw stronger increases in outward FDI, whereas import barriers are more broad-based, and less concentrated on strategic industries.

3. FDI-receiving industries are importing more production goods from China. These include machinery, capital goods and upstream inputs, which are used to build and run production rather than simply move final goods through ASEAN.

4. Vietnam and Indonesia show the clearest pattern. Their FDI-receiving industries recorded stronger increases in production-related imports from China, suggesting that local production capacity is being built around Chinese suppliers.

5. ASEAN is becoming more tied to China-linked production networks. The region’s linkages with China are deepening, even as its forward linkages with global markets continue to rise.

By Adam ROMZI and LIU, Jingting