Is China’s title as the “world’s factory” about to be snatched away by Southeast Asia?
Release time:
19 Oct,2019
“Made in China” has come to signify that, since the beginning of this century, China has steadily emerged as the world’s leading manufacturing powerhouse, with its products sold worldwide. The relocation of China’s manufacturing sector—particularly labor-intensive industries such as textiles and apparel—began in 2008, and by 2011, this trend had become widespread.
Among the countries taking on China’s industrial relocation, Southeast Asia is the most important region, with Vietnam attracting the greatest attention. So, can the Southeast Asian nations, led by Vietnam, step in to replace China as the next “world’s factory”?
Southeast Asian countries have both strengths and weaknesses.
There are two advantages, First is labor, second is transportation. Southeast Asian countries share the common advantage of a young population, with those under 30 accounting for more than 50% of the total population, and their labor costs are lower than China’s.
Next comes maritime shipping. When China exports lower‑value goods such as clothing and footwear to Europe, the Middle East, and Africa, it must rely on sea transport, which inevitably passes through the Strait of Malacca and requires transshipment and port calls at Singapore. Chinese companies incur substantial annual shipping costs as a result. In contrast, Southeast Asian countries, thanks to their unique geographical conditions, benefit from shorter routes and their own ports, giving them a more pronounced cost advantage in transportation.
However, the disadvantages of Southeast Asian countries are also evident.
First, the supply chain is incomplete. , without an ecosystem in place, the factory relies heavily on imports from China for many raw materials, components, and machinery.
Secondly, the overall skill level of the workforce in Southeast Asian countries is generally low. Moreover, within the global manufacturing value chain, China’s greatest asset is its 165 million skilled technical workers, who have all received quality vocational education and are highly diligent and disciplined.
Moreover, in terms of overall scale, Southeast Asian countries still lag far behind China in their capacity to serve as the world’s factory. However, from a medium- to long-term perspective, issues such as workforce quality, industrial scale, and infrastructure will gradually be resolved over time. It is highly likely that these countries will surpass China in manufacturing capabilities and scale for certain product categories—a trend driven by the global shift of industries.
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