Strength Through Diversification: Opportunities across Asia Pacific

This progression in mainland China is providing opportunities across the region, much of which first emerged in the mid-2000s and was directed initially towards South East Asia and now also to India. This originally was driven by cost pressures, with these markets offering the combination of comparatively less expensive labour and real estate costs; factors that are especially important for lower-order goods production, where cost pressures are a much more significant input variable. In USD terms, industrial rents in Greater Hanoi are 40%% cheaper than Tier 1 cities in mainland China, while markets in India are over 50% cheaper. These gains extend to Tier 2 cities in mainland China, though with a reduced margin nearer 5% for Hanoi and 25% to 40% for Indian cities. The impacts of this transformation are now becoming clearer, with China expected to soon account for less than 50% of low-cost imports to the U.S. in 2023 for the first time in a decade [7] . Vietnam has been a key beneficiary, which has doubled export volumes to the U.S. over the past five years and tripled them over the past decade, though India and Malaysia have also grown export share.

[7] Kearney



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