For several years "China+1" has been shorthand for companies adding a factory in Southeast Asia to reduce their reliance on China. The latest data supports part of that story: Southeast Asia now receives more foreign direct investment (FDI) than China.

The full picture is more mixed. Much of the money flowing into ASEAN goes to Singapore and to data centres rather than factories. A sizeable share comes from China itself, sometimes routed through Hong Kong. And some global equity funds have stopped reducing their exposure to Chinese shares.

The headline numbers

FDI inflows to South-East Asia rose from US$222 billion to US$244 billion in 2025, making it the largest recipient subregion in developing Asia, according to UNCTAD's World Investment Report 2026. Over the same year China's inflows fell from about US$116 billion to US$105 billion, down from more than US$160 billion in 2023, although China was still the world's fourth-largest FDI destination.

China's commerce ministry (MOFCOM) reported a similar fall: FDI in actual use dropped 9.5% in 2025 to RMB747.69 billion (US$106.92 billion), Xinhua reported. The decline has slowed in 2026. FDI fell 5.3% in January–August, while high-tech FDI jumped 35.1% to 41.7% of the total, according to MOFCOM data reported by Xinhua via The Star.

Sources measure this differently. The foreign-exchange regulator SAFE's balance-of-payments data, which nets out withdrawals, showed direct investment liabilities rising by US$76.5 billion in 2025, up from US$18.6 billion in 2024, China Daily reported. SAFE's preliminary first-half 2026 figure was US$56.7 billion (SAFE). Figures for ASEAN also get revised: the ASEAN Investment Report 2025 put 2024 inflows to ASEAN at US$226 billion, higher than the US$222 billion in UNCTAD's later report.

The latest national data use different measures, so they cannot be compared directly:

Economy Latest figure Change
China FDI in actual use RMB479.95bn, Jan–Aug 2026 −5.3%
Vietnam Disbursed FDI US$21.07bn, Jan–Sep 2026 +12.1%
Indonesia Realised FDI Rp257.7tn (US$14.3bn), Q2 2026, excl. oil and gas and finance +27.4% (in rupiah)
Thailand FDI applications US$40.5bn, H1 2026 +80%
Malaysia Approved foreign investment RM207.1bn, 2025 +20.9%
Singapore Fixed-asset investment commitments S$14.2bn, 2025 (to be spent over five years) from S$13.5bn
Philippines Net FDI inflows US$3.38bn, H1 2026 −17.8%

Sources: Vietnam News (National Statistics Office), Kontan, Thailand BOI, MIDA, EDB, GMA News (central bank data).

Where the China+1 money is going

Data centres more than factories. UNCTAD says data centres drove most of the growth in global greenfield project values in 2025 (UNCTAD). In Thailand, the digital sector accounted for US$33 billion of the US$43.6 billion of investment applications in the first half, and Singapore was the top source of FDI applications at US$33.2 billion, according to the BOI. Malaysia approved RM152.9 billion of investment in the information and communication sector in 2025, according to MIDA.

But investment in global value chain-intensive manufacturing in South-East Asia "more than halved, falling from $31 billion to $14 billion" in 2025, UNCTAD found.

Semiconductors and electronics. Among the largest greenfield projects announced in developing Asia in 2025 were a Micron semiconductor project in Singapore of about US$7 billion and an Amkor project in Vietnam of about US$4.5 billion, according to UNCTAD. These are announced capital spending estimates, not realised flows. Malaysia approved RM28.5 billion of electrical and electronics investment. In Vietnam, manufacturing took 82.6% of disbursed FDI in the first nine months of 2026.

Electric vehicles. BYD formally opened its Rp11 trillion plant in Subang, West Java, on 3 September, Metro TV News reported.

China is also investing in ASEAN

China is among the largest sources of new investment in several ASEAN economies. In Malaysia, China (RM58.0 billion) was just behind Singapore (RM58.3 billion) as a source of approved foreign investment in 2025, MIDA said. In Indonesia, Hong Kong overtook Singapore as the top source in the second quarter with US$5.0 billion, followed by Singapore (US$4.2 billion) and China (US$1.7 billion), RRI reported; Singapore remained the largest for the first half. Investment and Downstreaming Minister Rosan Roeslani said, according to RRI's English report: "In this second quarter, for the first time in the past 10 years, China has invested more aggressively through Hong Kong." Chinese firms received the most Thai foreign-business approvals in the first half (110), although Japan led by value, The Nation reported.

As Rosan's comment suggests, investment routed through Hong Kong or other hubs is recorded under those economies, so country-of-origin figures may not capture China's full role.

Portfolio money tells a different story

Stock-market flows have not followed FDI. Foreign investors had sold a net Rp82.55 trillion of Indonesian shares so far in 2026, Bisnis reported on 3 October. In contrast, year-to-date net foreign purchases of Thai shares stood at THB51.18 billion at the end of August, despite net selling in August itself (Kaohoon). ASEAN markets have diverged, as our year-end stock market outlook sets out.

ASEAN is also small in global benchmarks. In the MSCI Emerging Markets Index on 30 September, China's weight was 19.80%, behind Taiwan (28.94%) and South Korea (21.40%). Indonesia, Malaysia, Thailand and the Philippines were not listed separately and fall within an "other" group of 15.12% that also includes several non-ASEAN markets (MSCI). Meanwhile, Bank of America analysis of about 2,800 global funds found they had moved from an underweight to a neutral position on China since June, ending about four years of underweighting, Bloomberg reported on 28 September.

What company surveys say

  • Japanese firms: Only 21.3% of Japanese companies in China plan to expand in the next one to two years, a record low, against 56.9% in Vietnam and 46.8% across ASEAN, according to JETRO's survey from August–September 2025.
  • US firms in China: 57% plan to increase investment in China. On supply chains, 18% have already begun relocating manufacturing or sourcing out of China, while 71% have no intention of doing so, according to AmCham China's 2026 survey, conducted in October–November 2025.
  • European firms: 53% ranked China as a top-three destination for current investment, a record low, although "the intensity of the deterioration of confidence in China's business environment has eased", according to the EU Chamber's 2026 Business Confidence Survey summarised by China Briefing in May.
  • Global executives and investors: Mainland China was cited by 41% of respondents worldwide as the market likely to grow most in importance over five years, more than any other, in an HSBC survey published in April. Among Singapore respondents, 68% cited ASEAN as a growing economic priority.

The risks

US tariffs. After the US Supreme Court struck down tariffs imposed under emergency powers in February, Washington imposed Section 301 tariffs on 60 economies from 24 July (Orrick). Malaysia, Indonesia and Cambodia face 10%. Vietnam, Thailand, the Philippines and Singapore face 12.5%, the same tier as China. Computers, smartphones and chips are exempt (TNGlobal). Trade-remedy action is another risk: the US has issued anti-dumping and countervailing duty rulings on solar modules from Cambodia, Malaysia, Thailand and Vietnam, with some duties above 100%, ASEAN Briefing noted in October 2025.

Energy. The IEA said more than 10 million barrels a day of Gulf output was still shut in during August (IEA). See how the Iran war is hitting Asia.

Infrastructure and rules. On 4 September Thailand's data-centre policy board temporarily paused 166 projects while it drafts standards on water, power and siting (The Nation).

Key numbers

  • US$244bn: FDI into South-East Asia, 2025 (UNCTAD)
  • US$105bn: FDI into China, 2025 (UNCTAD)
  • −5.3%: China's FDI, January–August 2026 (MOFCOM)
  • US$14bn: global value chain-intensive manufacturing FDI in South-East Asia, 2025, down from US$31bn
  • 19.80%: China's weight in the MSCI Emerging Markets Index

What to watch

  1. MOFCOM's January–September data, to see if China's decline keeps narrowing.
  2. Thailand's new data-centre rules and when paused projects can resume.
  3. US tariff litigation and trade deals, which could change the gap between ASEAN and Chinese tariff rates.
  4. Whether announced projects are completed, especially in manufacturing, where UNCTAD's data show a sharp fall.

This is general information, not financial advice.

This article was researched with AI assistance and reviewed by the NDNews editorial team. It is based on official data and media reports as of 8 October 2026. It is not financial advice.