Southeast Asia grapples with mixed outcomes from China's second trade shock

Southeast Asia imported more than $0.5 trillion of goods from China last year, leaving the region with a collective trade deficit of about $290 billion that continues to widen. China’s customs trade surplus reached $1.2 trillion and its exports hit $3.8 trillion, a surge dubbed the “second China shock”. Unlike the first shock, China now supplies mainly parts, components and capital goods – around 90 % of the region’s Chinese imports – while also increasing investment. Direct Chinese manufacturing investment rose to $15.4 billion in 2024 (up from $5.7 billion in 2019) and total investment, including portfolio flows, reached roughly $75 billion, about 2 % of Southeast Asia’s GDP. Chinese projects tend to be more labour‑intensive, creating nearly twice as many local jobs as other foreign investors. Nevertheless, some sectors feel pressure: Indonesia’s textile industry lost 80,000 jobs in 2024, and Japanese‑owned auto plants in Thailand are scaling back or closing. The overall picture shows both challenges and gains as the region benefits from technology transfer and productivity boosts while managing trade‑deficit concerns.