Targeting Southeast Asia
Over the past few months, representatives from tech giants like Apple, Microsoft, and NVIDIA have visited Southeast Asia, meeting with leaders of countries such as Indonesia, Malaysia, and Thailand, and proposing large-scale investment plans.Earlier this month, Microsoft CEO Satya Nadella announced an investment of $2.2 billion in Malaysia to develop cloud and AI infrastructure following his visit to Malaysia, Indonesia, and Thailand. This marks Microsoft’s largest single investment in Malaysia in 32 years. Mr. Nadella also announced a $1.7 billion investment in Indonesia late last month to provide AI training and job opportunities for 840,000 people.
On May 7, Amazon announced a plan to invest an additional $9 billion in Singapore over the next four years to expand its cloud infrastructure.
At the same time, Apple has experienced a decline in sales in China. In April, Apple CEO Tim Cook visited Vietnam, Indonesia, and Singapore, meeting with prime ministers and announcing new investments. Despite a global decline in total sales, Apple’s revenue in Indonesia reached a historic high, according to the company’s report.
Previously, NVIDIA also planned investments in countries like Vietnam and Malaysia. In 2023, NVIDIA reached an agreement with Malaysia’s YTL Power International BHD to help introduce Malaysia’s fastest supercomputer, manufactured by NVIDIA YTL, by mid-2024. On March 19, YTL announced that it would deploy the world’s fastest AI supercomputer, driven by NVIDIA’s Grace Blackwell Superchips, in Johor, Malaysia to accelerate generative AI development.
Rising Middle Class in Southeast Asia
With a total population of 678 million, Southeast Asia is one of the regions in the world with the highest net population growth globally, and it has a significant young population. In recent years, the younger generation’s strong interest in video streaming, online shopping, and generative AI has fueled rapid AI development in the region. Google, Temasek, and Bain & Company estimated in their 2023 report that the local internet-related services market will more than double to $600 billion.
Southeast Asia also has a large market for electronics and online services. By 2030, it is estimated that about 65 percent of Southeast Asians will become middle class, boosting their purchasing power.
Frank Tian Xie, professor of business at the University of South Carolina Aiken told The Epoch Times that as international capital shifts to Southeast Asia, the region’s middle class will grow, workers’ incomes will rise, and technological advancements will follow.
Reasons for Southeast Asia Replacing China: Expert
According to data released by China’s State Administration of Foreign Exchange on Feb. 18, foreign direct investment net inflows in 2023 fell to their lowest level in 30 years, a decrease of 81.7 percent from 2022.Henry Wu, a Taiwanese macroeconomics scholar and chief economist at AIA Capital, told The Epoch Times there are four main reasons why global investment is shifting to Southeast Asia.
The first reason is geopolitical factors. Mr. Wu said that the Chinese Communist Party (CCP) views Southeast Asia as its backyard, aiming to control the region in addition to Taiwan. The United States seeks to gain influence in Southeast Asia to contain the CCP, making the region a critical battleground in U.S.-China competition.
The second reason is the demographic dividend. China once enjoyed a demographic dividend, but a declining birth rate and the significant loss of life during the COVID-19 pandemic have diminished this advantage. Southeast Asia’s population is nearly as large as China’s, offering its own demographic dividend and competitive labor force.
The third reason is middle-class development. Mr. Wu mentioned that if Southeast Asia’s middle class grows due to manufacturing shifts from China, the region’s economic volume could challenge and potentially surpass China in the future.
Countering the CCP
Due to its geopolitical significance, Southeast Asia is becoming a focal point for economic, military, and resource competition. The CCP’s ambitions in the region, through initiatives like the Belt and Road Initiative, face increasing global challenges.From 2018 to 2022, the United States led the global capital investment in Southeast Asia with $74.3 billion, while China followed with $68.5 billion in investments.
Mr. Xie believes that the CCP is at a disadvantage in Southeast Asia because China has lost in the field of lower-end manufacturing and remains lacking in high-tech sectors.
“The CCP relies heavily on the theft of American technology,” he said. “When they fail in espionage, [China’s] high-tech sector stagnates. Therefore, China is attempting to dump lower-end goods into Southeast Asia. However, Southeast Asian countries may increasingly produce their own goods, reducing reliance on Chinese imports.”
Mr. Wu emphasized the strategic differences between China and other global powers in Southeast Asia, noting that China’s economic model competes directly with Southeast Asia’s export-oriented economies. Chinese investments often aim to circumvent U.S. tariffs by shifting production to Southeast Asia. However, Southeast Asian countries prefer investments from Japan, Taiwan, South Korea, the United States, and Europe, which offer advanced technology and capital.
The strategic importance of the South China Sea further complicates the CCP’s position, as the CCP’s aggression has challenged the freedom of navigation in the waters. Recent conflicts over South China Sea sovereignty have escalated tensions, with the United States considering the region a key area to contain the CCP.
“If the United States and Japan are involved, Southeast Asian countries can shift away from the CCP and rely more on the United States and Japan,” Mr. Wu added.
