CARI Captures Issue 658: Chinese tech suppliers expand presence in ASEAN amid geopolitical tensions

ASEAN
Chinese tech suppliers expand presence in ASEAN amid geopolitical tensions
(31 May 2024) Chinese tech suppliers are increasing their presence in Southeast Asia, where Taiwanese and other rivals have long been helping the likes of Google and Apple expand production. For instance, Google has selected Chinese supplier Goertek to produce Pixel watches in Vietnam starting in 2025, a role previously held exclusively by Taiwanese companies. Additionally, BYD is bidding to manufacture Pixel phones in Southeast Asia, though no decision has been made yet. The strategic shift is driven by business considerations such as quality, service, and competitive pricing. The presence of Chinese suppliers in Vietnam has grown significantly, with 37% of Apple’s suppliers in the country being Chinese. Political tensions and economic slowdowns in China are also pushing Chinese companies to seek growth opportunities abroad. Investments by Chinese and Hong Kong firms in Southeast Asia surpassed those from Singapore in 2023, reflecting a systematic diversification effort by Chinese suppliers. The expanding supply chain in Southeast Asia may draw increased scrutiny from the U.S., particularly concerning trade practices and the growing trade surplus with the region.

MALAYSIA, URUGUAY
Uruguayan government plans to expand collaboration with Malaysia in halal meat and dairy market
(05 June 2024) The Uruguayan government, through the Institute of National Meat of Uruguay (INAC), aims to expand its collaboration with Malaysia in the halal meat and dairy market. Malaysia’s Deputy Prime Minister discussed this during a meeting with Uruguay’s Minister for Livestock, Agriculture, and Fisheries. Uruguay produces 600,000 tonnes of beef annually, with 450,000 tonnes exported, predominantly to China. Malaysia sees potential in sourcing halal meat from Uruguay to bolster its own food security. The Malaysian government plans to position Malaysia as a hub for processing, storage, and transportation of halal meat, especially for the ASEAN market. Key Malaysian bodies, including Jakim and the Halal Development Corporation, have been auditing Uruguayan abattoirs for halal compliance.

SINGAPORE
Singapore’s casino resorts begins second phase of development
(01 June 2024) When Lawrence Wong took over leadership of Singapore last month, the focus shifted to the legacy of former Prime Minister Lee Hsien Loong, particularly the casino resorts which began operations in 2010 and have since contributed 1% to 2% of annual GDP and doubled tourist arrivals to 19.1 million by 2019. The second phase of development for these resorts is underway, with Genting Singapore’s Resorts World Sentosa planning to start construction on two new hotels with 700 rooms by the end of 2024, and Marina Bay Sands set to add a fourth hotel tower, a 15,000-seat arena, and other facilities, with completion expected by July 2029. Both resorts will also expand their casino floors, with Marina Bay Sands gaining an additional 2,000 sq. meters and Genting gaining 500 sq. meters. The expansion, originally approved in 2019 and delayed by the pandemic, now faces higher costs due to inflation, with Genting’s investment rising to SG$6.8 billion, while Sands anticipates exceeding initial projections.

THE PHILIPPINES
Government to reduce tariffs on rice from 25% to 15% through 2028 to combat inflation
(04 June 2024) The Philippines will reduce tariffs on rice from 35% to 15% through 2028 to combat inflation. The head of the National Economic and Development Authority stated the move aims to lower rice prices, making it more affordable, as rice comprises 9% of the consumer price index and has significantly driven recent inflation. While this reduction is expected to lower consumer prices, analysts express concerns that it could harm Filipino farmers by making imported rice cheaper than domestic products. The president is set to issue an executive order to implement the tariff cut, while tariffs on corn, pork, and mechanically deboned meat will remain unchanged through 2028. Analysts warn of the negative impact on farmers’ incomes and stress the need for government support programs to mitigate these effects.

INDONESIA
Indonesian rupiah declines to four-year low of 16,293 per dollar
(05 June 2024) The Indonesian rupiah declined to a four-year low of 16,293 per dollar on 05 June, 2024, marking its weakest point since April 2020. Bank Indonesia intervened in both spot and domestic non-deliverable forward markets to stabilise the currency, as confirmed by Edi Susianto. Governor Perry Warjiyo stated ongoing efforts to maintain rupiah stability amid market volatility. Contributing factors to the rupiah’s weakness include seasonal dividend and Hajj pilgrimage outflows, and a narrowing trade surplus. The rupiah is the worst-performing emerging-Asian currency this quarter. It has been noted that dividend payouts by Indonesian companies are adding to the currency’s challenges.

SINGAPORE
Singapore seeks bids for two hydrogen-ready gas-fired power plants
(04 June 2024) Singapore’s Energy Market Authority (EMA) has issued a request for proposals to build, own, and operate two hydrogen-ready gas-fired power plants, each with a capacity of at least 600 megawatts. These plants are expected to be operational by 2029 and 2030. This initiative follows a separate request in 2023 for a power plant to be completed by 2028. The demand for electricity in Singapore is rising, driven by electricity-intensive sectors such as advanced manufacturing and transport. Peak power demand is projected to increase by at least 3.7% over the next six years, potentially reaching 11.8 gigawatts by 2030. EMA’s chief executive emphasised the importance of ensuring sufficient generation capacity to meet the needs of homes, workplaces, and communities.

THAILAND
Thailand approves tax measures to stimulate domestic tourism during low season
(04 June 2024) Thailand’s cabinet approved tax measures on 04 June, 2024 to stimulate domestic tourism during the low season, from May to November. Deputy Finance Minister Paopoom Rojanasakul announced that the measures include tax deductions for companies organising conventions and seminars. Additional incentives allow income tax deductions for expenses on homestays and non-hotel accommodations in secondary cities. Prime Minister Srettha Thavisin noted that the measures will cost the government THB 1.5 billion baht (USD 41 million) in revenue, but he expects the benefits to outweigh the costs.

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CHINA
China’s manufacturing activity contracts in May after two months of growth
(31 May 2024) China’s manufacturing activity contracted in May, with the manufacturing purchasing managers’ index (PMI) falling to 49.5 from April’s 50.4. This marks a return to contraction after two months of growth. The new order index dropped by 1.5 percentage points to below 50, indicating slowed demand in the manufacturing sector. Nonmanufacturing business activity also declined, with the index slipping 0.1 points to 51.1, influenced by downturns in the real estate and financial sectors. It is believed that the recovery has lost momentum and anticipated that increased fiscal support and property stimulus might boost short-term growth. Morgan Stanley economists highlighted structural imbalances, citing excess capacity and weak corporate margins due to the shift of credit from property to industrial investment. Official data showed ongoing challenges from soft domestic demand and a struggling property sector, which impacts consumer confidence and overall economic growth.

SOUTH KOREA
South Korea’s economy grows 4.9% more than previously thought every year on average since 2000
(06 June 2024) According to the Bank of Korea, South Korea’s economy has been revised to have grown 4.9% more on average annually since 2000, increasing the 2022 nominal GDP to 2,401 trillion won from a previous estimate of 2,236 trillion won. This revision lowers debt-to-GDP ratios, with household debt falling to 93.7% from 100.6% and government debt to 51.4% from 55.3%. The Bank of Korea’s updates incorporate new concepts, methodologies, and a base year change to 2020 from 2015. The manufacturing sector’s economic share grew, while services and construction shrank. In the first quarter, real GDP expanded 1.3% from the previous quarter, matching preliminary data, but year-on-year growth was slightly revised to 3.3% from 3.4%. Inflation slowed to 2.7% in May, maintaining speculation of a potential interest rate cut later in 2024 despite the current restrictive 3.5% benchmark rate. The BoK revised its 2024 economic outlook upwards following a stronger-than-expected first-quarter performance.

JAPAN, THAILAND
Japanese seafood distributors targeting Thailand as key market
(07 June 2024) Japanese seafood distributors are targeting Thailand as a key market following China’s ban on Japanese seafood imports. Yokohama-based Sprout Investment organised a tasting event in Bangkok in April 2024, showcasing sashimi from bonito and mackerel, which impressed local restaurant owners. Sprout, operating over 20 izakaya pubs in Japan and one in Bangkok, plans to enter the Thai seafood wholesale market by August, sourcing mainly from Chiba prefecture’s Boso Peninsula. Tokyo-based Uoriki aims to open up to 100 outlets in Thailand within five years, having formed a joint venture with Charoen Pokphand Group and opening its first outlets in October 2023. Uoriki plans to expand beyond Bangkok to cities like Chiang Mai and collaborate with Central Group. As incomes rise in Thailand, Japanese food, once a luxury, has become more common, supported by an improved cold chain.

15 participating countries	20 chapters	2.2 billion	US$26.2 trillion	28%
ASEAN member states, Australia, China, Japan, South Korea, New Zealand	trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement	combined population, 30% world’s population	combined GDP, 30% global GDP	global trade (based on 2019 figures)