China is in the midst of transitioning to higher value-added manufacturing under the government’s Made in China 2025 initiative to comprehensively upgrade industrial policy, say leading experts.
As China leads new regional initiatives to strengthen connectivity with large-scale infrastructure investment through the Asian Infrastructure Investment Bank and Silk Road Fund, it and ASEAN are set to benefit.
The advantages stemming from rapid regional economic growth in long-term commercial trade and investment flows will extend over the next decade and far beyond, the experts say.
Members of the ASEAN bloc and Chinese provinces in the Greater Mekong Subregion (GMS) in particular are expected to be amongst the biggest beneficiaries, as they are best-positioned to become low-cost manufacturing suppliers to the rapidly growing Chinese consumer market and industrial supply chain.
Currently, average manufacturing wages in Vietnam, Myanmar, Cambodia and Laos are considerably below those in the Chinese coastal provinces.
The Yunnan and Guangxi Zhuang autonomous region – the Chinese areas that are part of the GMS – also have relatively lower labour costs in comparison to the Chinese national average, and significantly lower wages than those of the coastal industrial hubs of Shanghai, Guangzhou, Tianjin and Beijing.
However, poor infrastructure connectivity is a major competitive weakness of the GMS, which has served to effectively constrain economic development to date.
Clement Blanc, managing director of DHL Global Forwarding Vietnam, recently was reported by the Vietnam Investment Review to have said that Vietnam has the potential to become the logistics hub for the GMS Subregion.
The country is well placed to benefit greatly from the elevated integration of economic ties among China and ASEAN via the GMS, particularly as a result of its central location and long coastline that makes it an ideal shipping channel.
George Berczely, chairman of the Transportation and Logistics Sector Committee of EuroCham Vietnam, agrees.
The goal, he says, is to improve infrastructure connectivity in Vietnam to allow high-speed rail networks and modern roads to link to the GMS Subregion and the Chinese provinces, such as Yunnan in southern China, to the Indian Ocean via Thailand and Myanmar.
This would significantly improve freight logistics for southern China for both imports and exports.
It would also create significant opportunities for the development of major new ports and free trade zones in Vietnam, Thailand and Myanmar, thus boosting their economic development by directly allowing them to join global supply chains.
