As the Chinese economy becomes trapped in the “new normal” of slowing growth, international investors have now found a new darling: the ASEAN countries.
Ten members of the Association of Southeast Asian Nations are working toward an ASEAN Economic Community, which is due to be inaugurated by the end of the year.
Taken together, the ASEAN countries would be the world’s seventh-largest economy, with a combined population of 620 million, mainly composed of young workers (while China is rapidly aging).
International Labor Organization figures show that the average monthly wage of Thai workers is US$400 – which, although higher than in many countries within the region, is merely two-thirds of that of their counterparts in China.
Workers in Vietnam — a thriving new manufacturing base with a population nearing 100 million – typically earn US$200 per month.
The figure for Indonesian workers is even lower.
Myanmar, Laos and Cambodia are also endeavoring to open their markets to foreign investors.
It appears that these countries are poised to take over the crown of “the world’s factory” from China sooner or later, while Beijing has been grappling with stalled industrial growth in recent years.
And the investment community is now hailing ASEAN countries as Asia’s third growth engine, after China and India.
How should Hong Kong respond to the changes underway?
What about Singapore and Taiwan?
Hong Kong’s economic fate has been closely tied to that of mainland China since the 1970s.
Leveraging on the lower production costs in China, our economy benefited tremendously from a relocation of production to the mainland.
But that strategy soon backfired.
Since the 1990s, the pace of our economic growth has been lagging behind that of Singapore.
The Lion City managed to retain the most vibrant and high-end manufacturing sectors, but we failed to do so.
Today, that divergence has led to a noticeable gap in per capita income between the two cities.
Both places have been actively involved in the “China play”.
While Hong Kong enjoyed geographic proximity and had the first-mover advantage, Singapore caught up and overtook us.
The key reason was the “hollowing out” of Hong Kong’s manufacturing sector amid sweeping cross-border economic integration that ultimately turned out to cost us dearly.
Now, in this round of the “ASEAN play”, what are Hong Kong’s odds of winning?
I’m afraid that the chances of Hong Kong gaining an upper hand are slim.
Singapore views Southeast Asia as its backyard, and the island state, being its own master, can roll out policies at will to sharpen its leading edge.
The opportunities emerging in the ASEAN countries mostly involve the manufacturing sector, which is almost absent in Hong Kong.
Hong Kong investors running factories in China can surely relocate their production lines to cheaper locations elsewhere, but their reinvestment and returns no longer count as part of Hong Kong’s gross domestic product.
Singapore is different.
With a strong manufacturing sector, it can move those less high-value-added sectors to other markets within the region to make room for continuous upgrading to fuel its growth.
Being at Southeast Asia’s geographical center and with a well-developed shipping infrastructure, Singapore is a vital entrepôt for the region’s exports.
In the broader picture, Hong Kong is being reduced to nothing more than a vassal and puppet of China economically.
Now the concern is that China itself is slowing down.
Singapore is indisputably the financial and economic capital of Southeast Asia, and the region’s vibrant growth story has just entered a new chapter.
Hong Kong has been lagging behind Singapore for quite some time now, and it’s foolish and cowardly for the government of Hong Kong to blame the pan-democratic camp for putting up obstacles.
For a long time, Taiwan has also been taking proactive steps to get involved in the “ASEAN play”.
As early as during Lee Teng-hui’s presidency, Taiwanese firms made forays into the region as part of the government’s attempt to counterbalance the island’s dependence on China.
Working in Southeast Asia has been a trend among many job starters in Taiwan, and many believe that the experience will be more rewarding and eye-opening than working in mainland China.
Taiwan also maintains deep social connections with many ASEAN countries, as a large proportion of its immigrants hail from the region.
Tertiary institutions in Taiwan have set up language departments teaching Vietnamese and Thai, which have exceeded Japanese and Korean in terms of popularity with students.
While Hong Kong is busy pushing to teach Chinese in Putonghua, in Taiwan, starting from 2018, students in primary and secondary schools will have to pick among Vietnamese, Thai and Indonesian as a compulsory foreign language course.
Unlike Hong Kong, Singapore and Taiwan are free from the mandate to integrate into another system, and they can avert risks by diversifying their investments and align themselves to the new landscape of regional development when opportunities present themselves.
This article appeared in the Hong Kong Economic Journal on June 1.
Translation by Frank Chen
[Chinese version 中文版]
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