Southeast Asia is likely to beat China in terms of investment return in 2019, amid the backdrop of an ongoing trade conflict between the U.S. and China, according to a market observer.
Raymund Chao, Asia-Pacific and Greater China chairman at consultancy PwC, said during a panel discussion at the Asian Financial Forum 2019 in Hong Kong on Jan. 14 that company executives in the region are adjusting supply chain arrangements as a response to the current economic environment.
"The shift of manufacturing [from China] to Southeast Asia is happening … Companies are making backup plans," Chao said.
According to a survey conducted during the panel discussion, about 39% of delegates believe that Southeast Asia will offer the best investment return in 2019, compared to 35% voting for China, 15% for the U.S. and 3% for Japan. The organizer did not disclose the number of respondents from the survey.
Victor Fung, chairman of the Fung Group, said during the same panel that companies are worried that products with a "Made in China" label could face additional duties in the U.S. Fung Group is the parent company of Hong Kong-listed supply chain manager Li & Fung Ltd.
The U.S. and China agreed on a 90-day truce in early December 2018 to try to resolve their trade dispute. However, the U.S. could still increase tariffs on US$200 billion worth of targeted Chinese goods from 10% to 25%, if no deal is struck during the period of detente.
Meanwhile, John Flint, group CEO of HSBC Holdings PLC, said that an overall transition to low-carbon operations could also accelerate a reshuffling of supply chain arrangements.
"The global banking industry is already working with clients and regulators to create metrics to measure the risks [of sustainability]… We are integrating climate risks into our credit standards and working with clients to make their own low-carbon transition," Flint said.
Flint noted that multinational corporations have started to review their supply chain and move away from high-carbon investments. "Around 80% of the MNCs' carbon footprint is in their supply chain. So they will be increasingly doing business with suppliers who understand what sustainability is," Flint said.