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Amy Sood

A surge in Chinese exports into Southeast Asia is testing the region’s industrial resilience, as manufacturers face mounting pressure from cheap imports that could intensify amid Washington’s escalating trade war.
Analysts stress that Asean governments must urgently bolster domestic competitiveness and move up the value chain to maximise the benefits from growing Chinese investment while shielding their economies from an influx of low-cost goods.
Chinese manufacturers are turning to Southeast Asia to sell surplus goods due to declining domestic demand and rising trade barriers abroad – particularly after US President Donald Trump slapped tariffs as high as 145 per cent on most Chinese imports.
China’s trade surplus in manufactured goods jumped from around US$1 trillion in 2018 to more than US$1.8 trillion in 2023, as supply continued to outpace domestic demand. And with access to US and European markets diminishing, Southeast Asia has become a key outlet.
In 2023, the Association of Southeast Asian Nations (Asean) surpassed the US and EU to become China’s largest export market. Chinese exports to Southeast Asia rose by 12 per cent, while Asean exports to China grew by just 2 per cent, signalling stagnation – or even decline in the case of Thailand and Indonesia – widening trade deficits and increasing strain on local industries.
Analysts warn that absorbing Chinese exports destined for the vast US market will be difficult for other countries, especially as Southeast Asian industries continue to struggle against the flood of low-cost Chinese goods.
Southeast Asian producers of textiles, cosmetics, electronics, and kitchenware are struggling to compete with Chinese manufacturers, whose highly automated supply chains give them a significant advantage.
The rise of e-commerce platforms like Temu and TikTok Shop has further accelerated the spread of Chinese goods in the region. In response, governments have introduced measures requiring these platforms to register locally and imposed higher tax rates.


Protections in place
In February, Indonesia-based Sritex – once Southeast Asia’s largest textile manufacturer – closed its doors, leaving more than 10,000 Indonesian factory workers without a job.
Danang Girindrawardana, executive director of the Indonesian Textile Association told This Week in Asia that a surge of cheap, often illegal imports from China, along with lingering pandemic effects and inadequate government support, had harmed the labour-intensive textile sector.
Danang fears the situation will only worsen, as small and medium-sized businesses struggle to keep up with fierce competition from cheap Chinese imports. Now, the industry is concerned that China may dump its low-cost apparel exports intended for the US to developing countries like Indonesia.
“The situation has not improved … our domestic market is saturated with imported fabrics and clothes,” he said. “Domestic factories are unable to compete with the prices of imported goods.”
According to Maria Monica Wihardja, an economist and visiting fellow at the ISEAS-Yusof Ishak Institute in Singapore, there are existing trade agreements between Asean and China to mitigate a sudden surge of imports or any dumping of goods, which include safeguarding measures like anti-dumping duties.
But Asean countries – some of which have benefited largely from Chinese manufacturing investment – should avoid increasing protectionist measures against Chinese imports, she said. Instead, they should leverage frameworks like the Regional Comprehensive Economic Partnership and the upgraded Asean-China Free Trade Agreement to pursue long-term strategic interests.

Focusing on value-added
Kirida Bhaopichitr, director of Thailand Development Research Institute’s Economic Intelligence Service, attributed the surge in Chinese goods in Bangkok to strong private sector demand.
“Chinese goods today are of high quality, and they are much cheaper than those that we used to import from the West or even produce locally in Thailand,” she told an online panel hosted by the Asia Society Policy Institute earlier this month.
Most of these imports, she explained, were not consumer goods but raw materials, intermediate, and capital goods essential for businesses.
As a result, she said Thailand’s private sector would be hesitant to impose tariffs on Chinese goods due to demand. Instead, the government is tightening industrial and health standards to slow the influx of these products.
Analysts also say that Southeast Asian countries are hoping to use local content requirements to force Chinese companies to increase their use of inputs from domestic industries.
This trend is increasingly evident in the electric vehicle (EV) sector, analysts say, particularly as Southeast Asian countries including Indonesia, Thailand and Malaysia are positioning themselves as regional hubs for production, benefiting from Chinese investments and government policies supporting EV adoption.
The lesson learned here is not only that we should have these local content requirements, but we should also upgrade our own skills
Kirida Bhaopichitr, public policy expert
Thailand has introduced a 40 per cent local content requirement to strengthen its supply chains, Bhaopichitr noted. In response, some Chinese companies are adapting by establishing factories in Thailand, producing parts locally to meet these content rules and effectively bypass restrictions.
“The lesson learned here is not only that we should have these local content requirements, but we should also upgrade our own skills here so there is local content that can meet the requirements of these investments coming in,” she said.
According to Monica, Indonesia must prioritise moving onto value-add processes, particularly as China dominates critical mineral supply chains. As a result, Indonesia implemented a downstream policy in 2022 that banned the export of unprocessed nickel ore. Since then, Indonesia has drawn billions of dollars in investments, primarily from Chinese firms such as steelmaker Tsingshan and battery giant CATL.
Chinese investment in Indonesia is largely directed toward refining and processing critical minerals for export to China, a trend reinforced by the downstreaming policy. According to Monica, this focus on extractive industries offers limited spillover benefits, keeping the manufacturing sector stagnant.
To fully leverage Chinese foreign direct investment, Indonesia should diversify its export base beyond raw materials and attract Chinese foreign direct investment in labour-intensive industries for job creation and capital-intensive sectors for industrial innovation and technology advancement, she added.


Speaking at the Asia Society Policy Institute panel, Rebecca Sta Maria, former executive director of the Asia-Pacific Economic Cooperation Secretariat, also underscored the need for Asean countries to prioritise the value added from Chinese investments.
While these investments have created jobs and economic activity in Cambodia, Laos, and Vietnam, she cautioned that their overall economic impact may be limited without solid industrial and investment policies.
“What is the value-add of these investments? It has to be part and parcel of the industrial policy and the investment policy,” she said. “Otherwise this will come back to haunt us.”
“If you do not emphasise capacity building, transfer of technology, technological input into the economy then there’s very little that economies like Cambodia, Laos and more can get out of these investments,” she said.


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Facing reduced domestic demand and increasing trade barriers, Chinese manufacturers are turning to Southeast Asia to export their surplus goods


Facing reduced domestic demand and increasing trade barriers, Chinese manufacturers are turning to Southeast Asia to export their surplus goods.


Can Southeast Asia shield industries from a surge in China’s exports, amid Trump tariffs?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Facing reduced domestic demand and increasing trade barriers, Chinese manufacturers are turning to Southeast Asia to export their surplus goods

Facing reduced domestic demand and increasing trade barriers, Chinese manufacturers are turning to Southeast Asia to export their surplus goods