More US firms may shift some business from China to ASEAN

Published by rudy Date posted on August 30, 2012

(Reuters) – A growing number of U.S. companies plan to shift some operations from China to Southeast Asia in the next two years as confidence in countries such as the Philippines improves, a survey by the American Chamber of Commerce in Singapore showed.

AmCham Singapore said on Thursday its survey of 356 senior executives working for U.S. companies in the region showed that 21 percent planned to reduce reliance on China by moving some businesses to Southeast Asia over the next two years, up from 15 percent in a 2011 survey.

Malaysia and the Philippines were the top choices for expansion, with both getting cited by 27 percent of respondents with plans to reduce their reliance on China. In a survey last year, 21 percent of those expecting to move some operations favoured Malaysia, and 11 percent cited the Philippines.

In the new survey, the next most favoured destinations were Vietnam and Thailand, with 24 percent each. The proportion citing Vietnam was down from 34 percent in the 2011 survey, when it was the top choice.

Indonesia was cited by 23 percent, compared with 11 percent last year.

AmCham did not give reasons why U.S. firms had become more interested in diversifying away from China, although rising costs likely were a factor.

Chinese labour costs have been climbing at double-digit rates for several years, and the average wage for migrant workers rose 15 percent in the first six months of 2012, official figures showed.

An Apple (AAPL.O) contract manufacturer, Taiwan’s Foxconn Group, for example, may invest up to $10 billion in Indonesia to take advantage of manufacturing wage costs that are just 60 percent of China’s.

According to AmCham Singapore, 92 percent of the executives surveyed said they were positive about investment opportunities in the Association of Southeast Asian Nations, or ASEAN – a regional grouping that comprises Indonesia, Thailand, Malaysia, Singapore, Vietnam, the Philippines, Myanmar, Cambodia, Laos and Brunei.

“ASEAN is not only a vital U.S. trade and investment partner, it is a bright spot in the global economy,” said AmCham Vice President Tami Overby. (Reporting by Kevin Lim; Editing by Richard Borsuk)