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27 May 2021

International Economy

Role of China in the CLMV Post-Pandemic World amid Ongoing Geopolitical Tensions (CLMV-EPI)


​China's economic role in the CLMV has substantially increased over the past years, particularly in trade via a number of strategies, aimed at building its economic influence and physical connectivity, such as transportation infrastructure projects and special economic zones under its Belt and Road Initiative (BRI). The BRI has enabled the CLMV to attract Chinese companies to invest in establishing industrial clusters and service industries to meet their needs for urbanization. Concurrently, China's attempts to promote institutional connectivity through various means, such as the relaxation of regulations for the benefit of international trade, have helped bolster the value of its international trade with the CLMV, as well.

Meanwhile, aside from the ongoing de-globalization, which has been triggered by the US-China trade and technology war, the world is being jeopardized by the fragility of global supply chains as a result of unpredictable factors, namely the COVID-19 pandemic. As a result, China and international companies have switched their priority towards neighboring countries as new locatio​ns for their supply chains in order to reduce and diversify operational risks. Their attempts will indirectly help counter US influence, as well. China has set its sight on the CLMV as these nations can serve as its manufacturing bases for agricultural and food products to ensure its food security post-COVID-19 pandemic as part of Beijing's dual circulation strategy. Additionally, the CLMV will likely become major recipients of investments that are set to diversify into their labor-intensive industries at an accelerated rate in the near future. Vietnam still has the potential to serve China as one of the locations for its new supply chains for technology-intensive industries such as electronics. However, Vietnam, which has become embroiled in geopolitical conflicts with China, is seen to have strengthened its relations with other countries to the extent that it has become a closer ally with the US in recent years. Moreover, Vietnam has adjusted the balance of its FDI, especially in the technology-intensive manufacturing and service sectors, so as to accommodate foreign investors from other countries rather than attracting FDI from China. 

International Economy