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China remains top manufacturing nation in Emerging Asia: report
Vietnam ranks second while Malaysia claims the third spot.
Even as more companies are diversifying their exposure away from China, the economic powerhouse continues to lead the Emerging Asia Manufacturing Index 2024 thanks to its robust infrastructure system and prowess in innovation.
Dezan Shira & Associates’ latest report showed China ranked first in terms of infrastructure and innovation this year given the huge investments that flowed into building among the region’s largest ports, airports, highway networks and high-speed railway system.
“China’s strategic infrastructure investments provide reliability and efficiency for manufacturers (if there’s no lockdown),” said Bruno Hernandez, senior associate for international business advisory at the firm.
The country’s total spending for research and development has also grown by more than 35 times in 27 years from 1991 to 2018, cementing its role as an innovation hub and a magnet for global investments.
“None of the other seven countries in this ranking can surpass China in terms of its
current innovation rate, given China’s status as an innovative powerhouse, distinguished
by substantial investments in research and development across multiple industries,” said Ines Liu, senior manager for international business advisory at Dezan Shira & Associates.
Dubbed the World’s Factory, China easily outstrips seven other countries in emerging Asia although issues surrounding its domestic workforce pose a risk to the sector’s growth.
The report said the country continues to boast of its skilled manufacturing labour force although the minimum and average wages are currently at elevated levels, and its population is ageing and declining.
Trailing behind China is Vietnam in the second spot with its stable and resilient economy. The Southeast Asian national also serves as a major international trade partner of developed nations, making it an investment hotspot for manufacturing.
“However, certain aspects, notably innovation and labor, face challenges primarily due to a relatively high median age. Despite this, the country compensates with a robust population growth rate,” Dezan Shira & Associates said.
A friendly business environment, resilient economy, and plenty of room for future growth boost Malaysia’s manufacturing sector into the third spot. The report said the country’s strength is underpinned by its “well-rounded” performance as it scored highly across all seven sections in the index, although its economic growth lagged that of its peers.
India ranked fourth with its large economy and huge population to support the expansion of its manufacturing sector. The report also found that the subcontinent requires the lowest capital to set up a company in Emerging Asia, although its government also imposes the highest corporate tax rate.
Southeast Asian nations Indonesia and Thailand claimed the fifth and sixth spots.
Indonesia prides itself on being the most stable economy among its peers, while Thailand attracts investors with its tax policy and robust infrastructure – the latter ranking second only to China.
The Philippines placed sixth mainly thanks to its large and skilled workforce, although challenges in its infrastructure, politics, economy and trade dampen its potential as a major manufacturing player.
Bangladesh placed last as the country continues to grapple with challenges in all aspects.
“The current assessment indicates substantial room for improvement, as Bangladesh trails behind the other selected nations in this year’s EAMI. Nonetheless, there is promise as Bangladesh’s youthful population and potential are emerging,” the report said.
