Cambodia and Vietnam in the US-China Trade War: Not All Good News

Both countries face opportunities, but investors cannot overlook the lingering risks.

With China’s demographic dividend gradually disappearing in recent years, production costs have soared in the world’s second largest economy. Facing rising labor costs coupled with mounting environmental pressures in the country, many Chinese and foreign multinationals have opted to relocate their factories from China to Southeast Asia, where labor costs are relatively lower than in the neighbor to the north. More recently, the intensification of the U.S.-China trade war has driven yet more of these companies to the ASEAN region as they set to offset a major risk to their businesses.

That said, it is overly simplistic to assume that the business environment in Southeast Asia is excellent for foreign investors. This is especially important considering that recent reports on the trade war’s benefits for several ASEAN countries (as made by several consulting companies and think tanks) have fallen short of covering the lingering risks of these economies. In fact, many foreign investors continue to encounter difficulties in their business operations in Southeast Asia, with two perfect examples being the beneficiaries of the U.S.-China trade war: Cambodia and Vietnam.

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