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 both physical connectivity and institutional connectivity, which has contributed to the acceleration of trade between CLMV and China. The strong influence of physical connectivity stems from the Belt and Road Initiative (BRI) such as transportation infrastructure projects and investment in special economic zones. The BRI has enabled the CLMV to attract Chinese FDI 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 from the concentration of production bases in China. Their attempts will indirectly help counter US influence, as well. However, the degree of China's influence post-COVID-19 depends on China's strategy and the CLMV's stance towards China under the conflict between two economic powers-US and China. It is expected that the CLMV will serve as China's manufacturing bases for agricultural and food products to ensure its food security.
Additionally, the CLMV will likely become major recipients of investments that are set to diversify into their labor-intensive industries at an accelerated rate. 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 may try to adjust the balance of its FDI, so as to accommodate foreign investors from other countries rather than attracting FDI from China.
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