Business & Economy

Why India, Asean are next investment hotspots after Chinese challenges

By Paloma Almoguera

Jakarta, Sep 4 (EFE).- China’s slowing growth and concerns about the stability of its economic model are prompting multinationals to seek alternatives in Asia, with India and the Asean figuring at the top of their wish lists.

Following a promising start to the year, the Chinese economy’s post-pandemic recovery slowed and grew less than unexpected in the second quarter, at 6.3 percent.

Declining domestic and international demand, deflation risks, a real estate crisis, inadequate stimulus measures, and a lack of confidence in the private sector have contributed to the Chinese deceleration.

In contrast, India recorded its fastest growth rate in the second quarter of the year (7.8 percent year-on-year), driven by a robust services sector and strong demand.

At the same time, the International Monetary Fund (IMF) has predicted that the Association of Southeast Asian Nations (Asean) will remain one of the fastest-growing regions this year, with a growth rate of around 6 percent.

India and Asean are gaining increasing influence on the global stage.

India is currently chairing the G20, the group of the world’s 20 major and developing economies, holding its annual summit in New Delhi on Sep 9-10.

On the other hand, Asean, consisting of Indonesia, Singapore, the Philippines, Myanmar, Thailand, Malaysia, Vietnam, Laos, Cambodia, and Brunei, is beginning its annual summit in Jakarta, Indonesia Tuesday.

Indonesia has raised its global profile and received acclaim for hosting the G20 last year.

In this context, China is losing the confidence of multinationals as businesses explore alternative overseas destinations.

China’s restrictive measures on the private sector and geopolitical and trade tensions with the United States have fuelled the mistrust.

Antonio Fatas, an economics professor at the global business school INSEAD, said many European and other international companies in Asia were undoubtedly considering diversifications.

And countries like India or Vietnam, with large populations and low labor costs, “are obvious choices,” Fatas told EFE.

Vietnam led the regional growth last year with 8.02 percent.

It has become an attractive destination thanks, among other factors, to low labor costs, its integration into the global supply chain, and relative political stability.

Chris Humphrey of the EU-ASEAN Business Council told EFE that the trend was “clear.”

“More than 8 out of 10 respondents in a 2023 survey expressed their intention to increase trade and investment levels with the region over the next two years. Expansion plans are particularly robust toward Indonesia, Vietnam, and Thailand.”

He said Asean was a vast and rapidly growing economy that could serve as both a complement and an alternative to China.

That is in tune with the approach of the US and some European countries, which view the shift toward Vietnam as a risk reduction rather than a complete decoupling.

Related Articles

Back to top button