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U.S.-China trade war underlines risk of concentrating production, triggers restructuring of supply chains: ANZ Research

The ongoing US-China trade war has underlined the risk of concentrating production in a single country and has triggered a restructuring of supply chains, according to the latest report from ANZ Research.

As businesses look to diversify their production bases, important considerations will include labour costs and skills, trade facilitation capability, domestic political stability and international relations as well as the presence of existing operations or industrial clusters in the host country.

Business surveys suggest Southeast Asia has emerged as the top destination of choice. But within the region, there will be outperformers. In ANZ’s view, Vietnam is best placed to benefit from investment diversions out of China while Thailand and Singapore also stand to be among the key beneficiaries.

Among next week’s economic events, Thailand will release its Q3 GDP figures on Monday, 19 November. Growth is expected to have eased to 4.2 percent y/y, following a strong performance in the first half of the year, the report added.

Further, Taiwan’s export orders data on Tuesday are likely to show a slower pace of expansion in October. Separately, monthly inflation data for Malaysia and Singapore will be released on Friday.

"We expect Malaysia’s headline CPI to have risen in October as the impact of the re-introduced Sales and Service Tax (SST) continues to pass through. Meanwhile, Singapore’s core inflation likely edged up in the month," the report commented.

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