- Bilateral trade surged to USD984bn in 2024, making ASEAN China's largest trading partner for five consecutive years
- Despite trade uncertainty, consistent FDI inflows continue to pour into ASEAN, capturing a 14.5% share of global FDI'
- In particular, Chinese investments are driving higher FDI inflows in Vietnam, Malaysia and Thailand in 2025
Stronger trade
Since 2020, ASEAN has surpassed the EU to become China's largest trading partner. Based on trade data, bilateral trade in 2025 is set to exceed 2024's high of USD984bn. While it is true that ASEAN runs a widening trade deficit with China, there are nuances. It largely reflects the increasing connectivity of supply chains, particularly in the electronics & electrical machinery (E&E) sector. While some 30% of ASEAN's exports to China are E&E products, 30% of the region's imports from China come from the same sector, benefitting tech-exposed economies like Singapore, Malaysia and Vietnam.
Meanwhile, ASEAN runs a trade surplus with China in agriculture and commodities. Indonesia's exports to China remain heavily concentrated in commodities. While Thailand and the Philippines are traditionally strong in agriculture, Vietnam is catching up quickly after signing multiple protocols with China.
But the strongest growth comes from a not-so-traditional fruit: durian. In China, this has grown into a multi-billion-dollar market. While Thai exporters have dominated since 2005, the competition is intensifying. Vietnam did not ship any durians to China until 2020, but after it saw how lucrative the market was, its exports rocketed to USD3bn in 2024. In fact, its market share in China has risen from 0% to over 40% in three years. Now, Malaysia, famous for its Musang King durians, has also joined the race in China after agreeing to export fresh durians from August 2024.
Booming FDI
After several years of subdued inflows of foreign direct investment (FDI), the trade tensions since 2018 have been a game-changer for the region. ASEAN-6 now captures 14.5% of global FDI, though 65% of this goes to Singapore.
Since the trade tensions, China has been ramping up efforts to invest in ASEAN. If we look at manufacturing, China's share in each ASEAN economy's FDI portfolio was barely 10% in 2015. But things have changed dramatically. Now, Thailand, Indonesia and Vietnam have seen a sharp jump in China's FDI share, exceeding 25%. While China's FDI shares in Malaysia and Singapore are not as dominant - they have received more advanced FDI from western countries in the E&E sector - the significance of Chinese investment is obvious. The only exception is the Philippines, where Chinese FDI is almost negligible.
The direction of Chinese investment varies by the comparative advantage in different ASEAN economies. In Indonesia, Chinese investment, including leading EV battery maker CATL and stainless-steel manufacturer Tsingshan, has been key in facilitating its nickel smelter boom, a key input for producing EV batteries.
But for Thailand, China's top EV producers, BYD, Great Wall Motor and SAIC, all have set up production lines. Malaysia, which is also competing in the EV manufacturing space, has also attracted investments into its green sector. In the case of Vietnam, Chinese investors are eyeing its edge in consumer electronics to expand capacity.
The Trump 2.0 tariff impact?
A common question we receive from clients is: Can the "China+1" strategy be sustained amid Trump 2.0 tariff dynamics? Although still at an early stage, high frequency data suggests the answer is yes - trade continues to flourish and FDI trends have intensified.
What is surprising is that Thailand has seen a pick-up in approved FDI applications to close to 7% of its GDP, 40% of which comes from the "digital sector", which we surmise is data centres.
Since the start of 2025, China has accounted for close to 40% of Thailand's total approved FDI applications. Interestingly, the majority has been invested in the metals, E&E and digital sectors. That said, it remains highly uncertain if the trend can continue at the current pace, given the border clashes with Cambodia and the upcoming election in February 2026.
Same as Malaysia, approved Chinese FDI applications have surged to push up their total FDI portfolios as of 3Q25. In Vietnam, steady inflows of new Chinese FDI have partially offset falling investments. For ASEAN, it's not only about supply chain relocations, but also how successful they can turn the trends into bigger market shares globally.
