Asia’s winners and losers in US-China Economical war, Vietnam & Malaysia:Part 1

Tiger economies like Hong Kong will feel the bite from the trade war, but mainly because US tariffs drive up the price of Chinese goods, Asia’s low-cost manufacturers will gain the most. Still, it’s a fleeting triumph – in the long term, everyone’s a loser.

For Bangladeshi garment maker Viyellatex Group, the spiralling trade tensions between China and the United States that have roiled global markets have instead been a boon for business.
US tariffs have pushed up the price of Chinese-made products so buyers have come to us, a leading producer in Bangladesh, the world’s second-largest exporter of ready-made garments.
“Until recently much of our exports were to the European Union, but since the US-China trade battle began, we are getting a lot more bulk orders from US purchasers,” Viyellatex Group chairman David Hasanat stated.

“Immediately after [US President Donald] Trump started the trade war last year, three American buyers who had folded their business in Bangladesh two years ago came and positioned bulk orders here.”
Three out of every 10 clients Hasanat now helps are from the US, up from two in 10 last year – including top American brands Calvin Klein and Tommy Hilfiger. The company’s turnover was close to US$200 million last year.

Like Bangladesh, additional Asian economies that are home to low-cost manufacturing hubs such as Vietnam, Thailand and Malaysia are not in circumstances of panic, despite both superpowers announcing tit-for-tat tariffs on each other’s goods that economists say will cripple global growth and hit exporting countries hard.

After Washington hiked tariffs from 10 to 25 per cent on US$200 billion worth of Chinese imports, to take effect in the coming weeks, Beijing on Monday announced US$60 billion worth of new duties on US imports from June 1.

According to almost all of the 14 analysts This Week in Asia spoke to, Asia’s low-cost manufacturing hubs will continue benefiting while firms seek to move their industries or supply chains out of China amid rising business costs, despite the likely continuation of a region-wide decline in exports.
But for Singapore, Hong Kong, Taiwan and South Korea – once known as the “Asian Tigers” for his or her high-growth economies – the outlook is gloomy while shipping volumes are expected to fall and uncertainty leaves companies’ plans for growth in limbo.
In a further blow to trade, Trump on Wednesday issued an executive order banning US firms from using technology produced by any firms assessed to be a national security risk.

VIETNAM

Perhaps more than any other economy, Vietnam – which expanded 7 per cent last year – has raced to position itself mainly because of a sanctuary for investors escaping the tensions between your world’s two most significant economies.
In January, premier Minister Nguyen Xuan Phuc said his country was ready to “grab the opportunity” presented by the ongoing spat.
Tommy Wu at Oxford Economics in Hong Kong said: “Beyond the near term, Vietnam will likely be the main beneficiary of a supply chain shift, given its close proximity to China, low wages and favourable trade and foreign direct investment policies.”

The nation’s exports rose more than 12 per cent from only a year before during the second half of last year, according to data from HSBC.
Foreign investment into Vietnam this season rose 86.2 per cent to US$10.8 billion in the first quarter. Chinese capitals made up nearly half of the total, as stated by the Chinese media.
Last month only, exports from Vietnam to the US rose 29 per cent, while capital investments from overseas soared more than 200 per cent.

GoerTek – a major Chinese supplier to Apple – and massive Taiwanese tech firm Hon Hai Precision Market Company, better known as Foxconn, are among prominent firms to move their manufacturing to Vietnam lately.
Clients of Vietnamese furniture business Xuan Hoa, which include global giant Ikea, have also redirected their supply chain from China to Vietnam in the wake of the tariffs. The company’s chief executive told Bloomberg last month that at least 10 prospective clients had reached him from abroad already in 2019 and he expected sales to dual in the next five years.
“Vietnam is one of the most open economies in Asia,” said Kiran Nandra-Koehrer, professional in emerging countries economies at Pictet Asset Management.
Shifting supply chains from China would be part of an influx in foreign direct investment coming to Vietnam, suggested Nandra-Koehrer, especially in textile production and even electronic gadgets.

MALAYSIA

Malaysia is also well-placed to attract supply chains relocating from China, especially in the tech sector, analysts suggest. Weighed against its neighbours, average wages are higher in the nation, which has a per capita GDP of US$10,000.
Malaysia’s biggest gains could come from liquefied natural gas, communication technology, and electronics goods integrated circuits, relating to a written report} released this past year} by Nomura Global Marketplaces Analysis analysing the then 7,705 items} on the tariff list.

Malaysian companies topping the reports are among the trade war winners included Inari Amerton, Globetronics Technology, Petronas Chemical substances Group and Mi Equipment Holdings.,
Wu of Oxford Economics said that Malaysia stood to get on the back again of experiencing relatively advanced infrastructure and a “business-friendly environment” already set up.

Kuala Lumpur 311018/ from left : Kedah Industrial Skills and Management Development Centre (KISMEC) Executive Director Mohd Yusuri Yusof, Malaysia Prime Minister Tun Dr Mahathir Bin Mohamad, Bosch Rexroth Sdn Bhd Managing Director Michel Gunawan and MIT Academy CEO Anthony Ng looking at the mM4.0 Bosch Rexroth machine with New Technology Modern showing at the launching ceremony National Policy on Industry 4.0 at Kuala Lumpur

Experts claim that regardless of the dramatic change in national administration this past year with the election of Mahathir Mohammad’s Pakatan Harapan coalition, the continuity of it is steady business regulatory environment offers made it an excellent choice for investors.
That, plus its higher competent experienced labour and growing advanced technological capacity, will make it a great option for foreigner FDI in hi-tech, he said.
Nevertheless, analysts say the tech sector is usually risky. Currently, existing electronics supply chains selling to China face risk if China’s consumer electronics sector gets a significant downturn warns the Asian AMRO Regional Economic Outlook released this month.

Note : Part 2 of this article will be published next week

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