With the recent escalation in the China-US trade war, Asia is beginning to feel the pressure. Market predictions have taken a turn for the pessimistic as we anticipate the fallout from this squabble. However, the trade war has also presented some opportunities for certain countries to benefit from.

Thailand, for example, is already profiting from the stand-off as the Chinese shift manufacturing and production to Southeast Asia to escape escalating tariffs.

Chinese foreign direct investment (FDI) into the sector rose last year by 31.7 per cent to US$233 million, after declining by 15.7 per cent in 2016-17, according to Bank of Thailand data. In the same period, total FDI into Thailand skyrocketed by 130.5 per cent year on year, after rising by two-thirds in 2016-17. Chinese investment accounted for 4.3 per cent of total FDI last year and 7.6 per cent in 2016-17.

A report by real-estate services company CBRE shows a growing trend in FDI into Thailand was occurring even before the trade war began. However, with China’s increased participation, the growth is being accelerated.

CBRE also said China could be in line to take over from Japan, which has been the largest source of investment into Thailand since the late 1980s.

Although the trade war is helping to drive investment into Southeast Asia, factors such as rising labour costs in China and widening diversification of Chinese manufacturing to reduce future risks will be key to determining growth in investment in industrial property in Thailand.

Apart from Thailand, most of the other SEA countries are set to be potential alternatives to serve as manufacturing hubs for companies exiting China. Vietnam, Malaysia and Indonesia are all viable substitutes, although some have speculated that Vietnam is becoming oversaturated.

Rising land and labour costs, bottlenecks at ports, traffic jams on roads and diminishing manufacturing capacity are the main causes of this aforementioned saturation. Overall, it is diminishing the appeal for Vietnam as a manufacturing hub.