Why China is no longer the world's factory

With China fast developing and its manufacturing industry moving up the value chain, multinationals are looking for new bases to produce their goods.

July 19, 2017

For many companies like Samsung, Intel and Fox, Southeast Asia ticks all the boxes – with Vietnam and Indonesia just ahead of the crowd. As interest grows, export growth from Indonesia, Malaysia and the Philippines accelerated to 5-6 percent annually, while exports from Vietnam and India increased by 9-10 percent a year in the last two years.

And it’s an equally bright picture for Southeast Asia going forwards, according to research from JLL, even if challenges still remain. “In the medium term, further expansion in Southeast Asia’s economies will be influenced by education quality and physical urban infrastructure,” says Regina Lim, Head of Capital Markets Research, JLL Southeast Asia.

And what of China? During its manufacturing heyday in 2010, the country’s exports reached more than $1.5 trillion a year. Yet its decision to restructure its economy towards domestic consumption, services and higher value exports has reduced that figure. Plus costs for industrial land and construction costs for building factory units are now higher than for cities in Southeast Asia.