As global trade evolves, the ASEAN-China trade relationship has become a vital driver of economic growth in Southeast Asia. Projected to grow at 5.6% annually, trade between the two regions is expected to reach US$558 billion by 2033, creating both opportunities and challenges for ASEAN nations. For Thailand, this growth offers a chance to capitalise on its strategic location and manufacturing strengths while mitigating risks associated with over-reliance on China. Aparna Bharadwaj, Global Leader of the Global Advantage Practice at Boston Consulting Group (BCG), shared her insights on navigating these complexities and preparing for the future of regional trade in an exclusive interview.
Thailand’s Opportunities and Risks in ASEAN-China Trade
The rapid growth of ASEAN-China trade, fuelled by China’s "Belt and Road Initiative" and the Regional Comprehensive Economic Partnership (RCEP), offers significant opportunities for Thailand. As a top beneficiary of the "China plus one" (C+1) strategy—a trend where companies diversify supply chains away from China—Thailand is well-positioned to attract foreign investment and expand its export markets. Key sectors like agriculture, electronics, and automotive parts are expected to benefit from increased demand, as Thai exports play a crucial role in global supply chains.
However, this growth also presents risks. Over-dependence on China could expose Thailand to vulnerabilities, such as fluctuations in Chinese domestic demand or sudden policy changes. "Thailand must tread carefully in navigating the geopolitical landscape," cautioned Ms. Bharadwaj. "Diversifying trade partnerships and upgrading manufacturing capabilities are essential to mitigate these risks and avoid losing ground to competitors like Vietnam, India, and Mexico."
Leveraging Thailand’s Strategic Location and Strengths
Thailand’s geographical advantage in Southeast Asia, combined with its robust infrastructure and diversified manufacturing sector, positions it to play a larger role in global supply chains. Ms. Bharadwaj emphasised the importance of continued investment in transportation and logistics networks to enhance connectivity within ASEAN and beyond. "Efficient logistics networks will enable Thailand to receive raw materials faster and deliver finished goods to global markets more efficiently, boosting economic development through international trade," she explained.
Collaboration with other ASEAN nations is also critical. For example, in the electric vehicle (EV) sector, Thailand can source critical minerals from Indonesia, components from Vietnam, and leverage Malaysia and Singapore as key markets. "By fostering regional partnerships, Thailand can unlock the full potential of its manufacturing capabilities and become a hub for high-value industries," Ms. Bharadwaj noted.
Furthermore, embracing Industry 4.0 technologies—such as automation, artificial intelligence (AI), and predictive analytics—can enhance production efficiency and attract high-tech industries. "Thailand must think beyond cost advantages and focus on innovation, technology leapfrogging, and building a strong cultural brand to sustain its competitive edge," she advised.
ASEAN’s Geopolitical Challenges and the Path to Resilience
ASEAN has so far navigated the US-China rivalry relatively successfully, positioning itself as a neutral and desirable partner for both superpowers. However, the region faces mounting challenges, including rising protectionism, unpredictable trade policies, and stricter environmental regulations. "ASEAN cannot take its advantaged position for granted," Ms. Bharadwaj warned. "The region must strengthen its sustainability-linked cooperation, such as ESG (Environmental, Social, and Governance) disclosure, regional carbon markets, and investment in sustainable production processes, to create a resilient trade ecosystem."
One of the most pressing challenges is the European Union’s Carbon Border Adjustment Mechanism (CBAM), which will require ASEAN businesses to review their supply chains and production processes to comply with carbon emission standards. "ASEAN must act swiftly to adapt to these regulations and position itself as a leader in sustainable trade practices," Ms. Bharadwaj stressed.
Mitigating Risks and Diversifying Trade Partners
To reduce reliance on specific markets, ASEAN countries must diversify their trade partnerships and strengthen regional supply chains. Ms. Bharadwaj highlighted the importance of expanding trade relationships with regions such as India, the Middle East, and Africa. "Individual ASEAN countries have already embarked on bilateral efforts, such as Vietnam’s FTA with the Eurasian Economic Union and Singapore’s FTA with the Gulf Cooperation Council. These initiatives can serve as models for deeper engagement with non-traditional partners," she said.
ASEAN-wide cooperation is also crucial. "In a multipolar world, global trade will be governed by a mosaic of regional and multilateral treaties. ASEAN must act as a unified bloc to maximise its bargaining power and craft partnerships with global superpowers," Bharadwaj explained.
The Role of Technology in Enhancing Supply Chain Resilience
Technology is a critical enabler of supply chain resilience, offering businesses the tools to increase efficiency, manage risks, and adapt to market disruptions. Digital trade platforms and blockchain technology can improve transparency and traceability, reducing delays and ensuring compliance with international trade regulations. "Practical policies, such as the adoption of e-bills of lading and e-invoicing, can reduce trade documentation costs and promote interoperability between ASEAN economies," Ms. Bharadwaj noted.
AI and predictive analytics can help businesses anticipate demand fluctuations and optimise inventory management, while automation and smart factories can transform production processes. "Investing in digital infrastructure and adopting Industry 4.0 technologies will be essential for ASEAN businesses to remain competitive in a rapidly evolving marketplace," Ms. Bharadwaj added.
Policy Recommendations for ASEAN Governments
To enhance ASEAN’s competitiveness and regional trade integration, governments must prioritise harmonising trade regulations, removing non-tariff barriers, and investing in infrastructure. "Simplifying customs procedures and standardising trade policies across ASEAN member states will facilitate seamless cross-border trade," Ms. Bharadwaj stated. "Expanding port capacity, improving road and rail networks, and enhancing digital infrastructure will strengthen supply chain connectivity within ASEAN and with global markets."
Governments could also encourage investment in high-value industries, such as technology, renewable energy, and advanced manufacturing, to ensure ASEAN remains competitive amid shifting global trade dynamics. "Policies that promote sustainable trade practices will be essential, particularly in response to EU carbon-pricing regulations and global environmental concerns," Ms. Bharadwaj underscored.
Preparing for a Fragmented Global Trade Landscape
As global trade becomes more regionalised, Thai businesses must adapt by strengthening their presence in regional and domestic markets while maintaining global competitiveness. "Diversifying supply chains within ASEAN and beyond, upgrading technological capabilities, and staying informed about geopolitical developments will be key to thriving in this new environment," Ms. Bharadwaj advised.
The Long-Term Implications of US-China Trade Tensions
The US-China trade war has reshaped global supply chains, creating both challenges and opportunities for ASEAN. While the region has benefited from the China+1 strategy, heightened scrutiny on Chinese-linked supply chains poses risks. "ASEAN must position itself as a neutral, reliable trade partner, strengthening its manufacturing capabilities and enhancing regional trade cooperation to attract foreign investment," Ms. Bharadwaj pointed out.
Emerging Trends in Global Trade
Digital trade, e-commerce, and sustainable trade practices are set to shape the future of global trade. "ASEAN businesses must invest in digital infrastructure, fintech, and online platforms to expand their reach," Ms. Bharadwaj noted. "Sustainability will also play a critical role, as businesses adopt eco-friendly production methods and governments implement green trade policies."
Conclusion: A Bright Future for ASEAN and Thailand
As ASEAN and Thailand navigate the complexities of the global trade landscape, the region’s ability to adapt to emerging trends, foster regional cooperation, and embrace technological innovation will determine its success. By leveraging its strategic location, strengthening supply chain resilience, and diversifying trade partnerships, Thailand can consolidate its position as a key player in the evolving global economy. With visionary leadership and a commitment to sustainable growth, the future of ASEAN-China trade—and Thailand’s role within it—looks promising.