middleclass

l Global Research l 

Special Report 

Shop Talk – China, ASEAN and robotics 

Highlights 

Our survey of 290 manufacturing companies in the Pearl River Delta 

(PRD) reveals a persistent labour shortage in China. Corporates 

expect an average wage increase of 7.7% in 2016, while margins 

remain low. This, combined with external headwinds due to weak 

global demand, presents a challenging outlook for manufacturers. 

Rising wages reflect China’s improving productivity and the 

increasing complexity of goods it produces. 

One in two clients prefer investing more in automation and 

streamlining processes to tackle labour shortages. Respondents are 

also increasingly opting to relocate production: 30% want to move, 

preferring inland China and offshore destinations in ASEAN, such as 

Vietnam and Cambodia. 

Chidu Narayanan +65 6596 7004 

Chidambarathanu.Narayanan@sc.com 

Economist, Asia 

Standard Chartered Bank, Singapore Branch 

Kelvin Lau +852 3983 8565 

Kelvin.KH.Lau@sc.com 

Senior Economist, HK 

Standard Chartered Bank (HK) Limited 

Tony Phoo +886 2 6603 2640 

Tony.Phoo@sc.com 

Senior Economist, NEA 

Standard Chartered Bank (Taiwan) Limited 

Edward Lee +65 6596 8252 

Lee.Wee-Kok@sc.com 

Head, ASEAN Economic Research 


ASEAN – with its lower wages, abundant labour and rising middleclass 

affluence – is well positioned to benefit from the PRD’s shift up 

the value chain towards high-end manufacturing and services. 

Investment in infrastructure and technology, along with a focus on 

improving ease of doing business, will be the key for ASEAN to take 

over from China as the world’s next manufacturing hub, in our view. 

Embracing technology as a potential disruptor in improving 

productivity would help keep the region ahead of the curve. 

Important disclosures can be found in the Disclosures Appendix 

All rights reserved. Standard Chartered Bank 2016 

https://research.sc.com

Special Report: Shop Talk – China, ASEAN and robotics 

Contents 

Overview 3 

Key infographics 5 

Feeling the PRD pulse 7 

China through the PRD lens 8 

The slow, painful economic transition continues 8 

Gauging the challenges, starting with wages 9 

Tackling the challenges, starting with the government 13 

Asian manufacturers – A deep dive 20 

How the manufacturers differ 21 

Divergence in preferences due to structural dissimilarities 21 

ASEAN – The next PRD? 27 

ASEAN – Poised to benefit 28 

Opportunities for ASEAN 28 

ASEAN – Set to outperform in the next 20 years 32 

Challenges – Technology could be a major disruptor 39 

Vietnam – The emerging alternative for manufacturing 40 

Global Research Team 43 

Acknowledgements 

We would like to acknowledge the contributions of Jonathan Koh to this report. 

19 July 2016 2

Overview 


The PRD offers us unique insights 

into China’s cyclical slowdown and 

structural transformation 

Overview 

Our annual Pearl River Delta (PRD) manufacturing surveys provide us with important 

data points, particularly on trends in wages and the labour market, where reliable 

official data is scarce. Almost 300 clients participated in our survey this year. Looking 

through the PRD lens gives us unique insights into China’s cyclical slowdown and 

structural transformation. The PRD is a microcosm of the abundant opportunities in 

China, but also of the country’s challenges in transitioning to a more sustainable, 

balanced economy. Meanwhile, ASEAN is set to gain from the PRD’s transformation. 

 

 

80% of our respondents expect the labour shortage to be at least as bad as last 

year, despite China’s slowing economy. 

Wages are expected to rise 7.7% in 2016, showing little let up from last year’s 

7.8%; this should continue to support consumption and help China avoid a 

hard landing. 

A focus on increasing productivity 

to counter lingering high costs and 

weak orders should support China’s 

growth 

However, lingering high costs, weak orders, narrowing margins and widespread 

pessimism mean tougher times ahead for an already over-leveraged China Inc, 

keeping the recovery ‘L-shaped’ at best. 

 

A weaker Chinese yuan (CNY) is having a mixed impact on PRD manufacturers, 

but the government has stepped up policy support. 

 

 

 

Corporates are responding to narrower margins: one in two clients prefer 

automation and streamlining processes, spurring much-needed productivity 

gains for the economy. 

13% of respondents are considering the option of relocating overseas, up from 

only 9% in 2013. 

Over 50% of respondents see potential benefits from the ‘Belt and Road’ and 

‘Made in China 2025’ initiatives. 

Figure 1: Challenges for manufacturing companies emerge clearly when we look at the details 

Industry 

Preferred response 

to labour shortage 

Estimated wage 

rise for 2016 (%) 

Wages as a 

share of 

total costs (%) 

Expected 

change in 

orders over next 

6 months (%) 

Expected 

change in 

margins in 2016 

vs 2015 (%) 

Semiconductor 

manufacturing equipment 

Semiconductor fabrication 

Electronics packaging 

assembly 

Component manufacturing 

Non-electronics 

manufacturing 

Automation/Move out 

of China 

More 

capex/Automation 

More capex/Move 

inland 

Automation/More 

capex/Move inland 

Automation/Move out 

of China 

6.0 20.8 -10.8 -7.9 

9.2 21.7 -11.0 -7.2 

7.6 24.2 -9.8 -8.9 

9.4 22.7 -7.6 -5.5 

6.4 21.9 -4.0 -4.0 

All manufacturers 7.7 22.5 -7.6 -6.1 

Red is high, green is low and yellow is moderate 

Source: Standard Chartered Research 

19 July 2016 3

Overview 


China’s labour shortage and wage pressures affect both high-tech and low-tech 

manufacturers. This year, we drill deeper into how manufacturers’ preferences are 

affected by the industry they operate in. 

 

 

 

Higher-end manufacturers are likely better placed to handle these pressures as 

they focus on high productivity and more value-added activity; almost 75% of 

high-end electronics manufacturers said that worker productivity had increased 

faster than wages. 

Higher-end manufacturers also favour capex investment as a way to address the 

labour shortage; meanwhile, non-electronics corporates prefer to move out of 

China, heavily favouring ASEAN as an attractive alternative production 

destination. 

All our respondents, across industries, expect margins and orders to reduce 

this year. 

ASEAN is set to become the world’s next manufacturing hub, in our view, as China 

continues its transformation into a more services-oriented economy. ASEAN benefits 

from an ample supply of cheap and good-quality labour. Furthermore, the region’s 

high economic growth and rising middle class offer manufacturers opting to relocate 

from the PRD an opportunity to capture a share of its large and growing 

consumer market. 

ASEAN, particularly Vietnam, is the 

favoured destination to relocate 

production out of China 

Technology is likely to be the 

biggest disruptor in low-cost 

manufacturing 

We believe Vietnam in particular is in a sweet spot to gain from this trend, given its 

mix of a cheap and educated labour force, a large and growing working-age population 

and an increasingly affluent middle class. Vietnam also enjoys geographical proximity 

to China, and is likely the biggest beneficiary of regional trade pacts such as the 

Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership 

(RCEP). 

While attractive in the short run, we believe manufacturing dependent on low-cost 

labour is not sustainable without investment in infrastructure and technology. More 

importantly, ASEAN countries need to focus on continued infrastructure investment 

and the removal of bottlenecks to encourage foreign direct investment (FDI), in our 

view. Technology could be the biggest disruptor for the region in low-cost 

manufacturing, but also its greatest challenge to becoming the world’s manufacturing 

hub. Low-skill, repetitive jobs, which are more likely to move to ASEAN, are also 

prone to replacement by programmed machines and engineering advancements. 

Automation and robotics will help drive China’s move up the manufacturing value 

chain; we think ASEAN should learn from China’s experience and embrace this trend 

sooner rather than later. 

19 July 2016 4

2015 

2015 

Infographics 


Key infographics 

Figure 2: Almost 1 in 4 companies plan to increase wages more than in 2015; 58% plan to increase at the same pace 

% of respondents; blue shading indicates faster expected wage growth this year versus 2015 

2016 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No change 6.3% 3.5% 0.3% 1.0% 0.0% 

Up 5% 3.8% 30.4% 8.7% 1.0% 0.3% 

Up 10% 1.4% 4.5% 15.4% 5.9% 0.3% 

Up 15% 1.0% 0.3% 2.8% 4.2% 1.0% 

Up 20% 0.7% 1.0% 1.4% 1.4% 1.7% 

Please refer to page 9, ‘Feeling the PRD pulse’, for a detailed discussion; Source: Standard Chartered Research 

Figure 3: 22% of corporates expect margins to compress more in 2016 than in 2015; 58% expect similar compression 

% of respondents; blue shading indicates those expecting better margin changes this year than last year 

2016 

Down 30% Down 20% Down 10% No change Up 10% Up 20% Up 30% 

Down 30% 5.2% 0.7% 0.0% 1.0% 0.0% 0.7% 0.3% 

Down 20% 0.3% 5.9% 4.2% 1.4% 1.0% 0.3% 0.0% 

Down 10% 0.3% 5.6% 24.4% 4.2% 2.1% 0.7% 0.0% 

No change 0.0% 0.3% 6.6% 15.0% 2.1% 0.0% 0.0% 

Up 10% 0.0% 1.0% 2.1% 4.5% 6.3% 0.7% 0.0% 

Up 20% 0.0% 0.0% 0.0% 0.3% 1.0% 1.0% 0.0% 

Up 30% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 


Figure 4: Do you expect to benefit from the ‘Belt and Road’ initiative? (% of respondents) 

22% 21% 14% 

Yes Yes, it should broaden our range of suppliers Yes, it should help boost demand from 

Yes, it should create new 

overseas 

investment opportunities 

overseas 

No foreseeable 

benefit for now 

44% 

0% 10% 20% 30% 40% 50% 60% 


Figure 5: Do you expect to benefit from the ‘Made in China 2025’ campaign? (% of respondents) 

Yes 

Yes, we should benefit from rising domestic content of core 

components and materials 

29% 16% 12% 

Yes, we should benefit from policy 

support as we are in one of the 

priority sectors 

Yes, we should benefit from 

faster innovation, technology 

and IP development 



43% 

0% 10% 20% 30% 40% 50% 60% 


19 July 2016 5

2015 

2015 

2015 

Infographics 

2015 

2015 


Wage growth, 2015 actual vs 2016 expectations 

% of respondents; blue shading indicates faster expected wage growth this year vs 2015 

Figure 1: Component manufacturers* 

2016 

Figure 2: Electronics packaging assembly* 

2016 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No change 4.7% 0.0% 0.0% 3.1% 0.0% 

No change 9.7% 3.2% 0.0% 1.6% 0.0% 

Up 5% 4.7% 14.1% 9.4% 1.6% 0.0% 

Up 5% 4.8% 35.5% 6.5% 1.6% 0.0% 

Up 10% 1.6% 3.1% 21.9% 7.8% 1.6% 

Up 10% 1.6% 0.0% 12.9% 8.1% 0.0% 

Up 15% 0.0% 1.6% 4.7% 9.4% 0.0% 

Up 15% 0.0% 0.0% 1.6% 4.8% 1.6% 

Up 20% 1.6% 1.6% 3.1% 1.6% 3.1% 


Up 20% 0.0% 1.6% 1.6% 1.6% 1.6% 


Figure 3: Semiconductor fabrication* 

No 

change 

2016 

Up 5% Up 10% Up 15% Up 20% 

No change 5.3% 5.3% 0.0% 0.0% 0.0% 

Up 5% 0.0% 23.7% 13.2% 0.0% 2.6% 

Up 10% 0.0% 5.3% 21.1% 7.9% 0.0% 

Figure 4: Semiconductor manufacturing* 

No 

change 

2016 

Up 5% Up 10% Up 15% 

No change 8.3% 0.0% 0.0% 0.0% 

Up 5% 4.2% 45.8% 8.3% 4.2% 

Up 15% 0.0% 0.0% 2.6% 0.0% 2.6% 

Up 20% 0.0% 0.0% 2.6% 5.3% 2.6% 

Up 10% 4.2% 4.2% 8.3% 4.2% 

Up 15% 4.2% 0.0% 0.0% 4.2% 



Figure 5: Non-electronics* 

2016 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No change 5.3% 6.3% 1.1% 0.0% 0.0% 

Up 5% 4.2% 37.9% 8.4% 0.0% 0.0% 

Up 10% 1.1% 8.4% 12.6% 3.2% 0.0% 

Up 15% 2.1% 0.0% 3.2% 2.1% 1.1% 

Up 20% 1.1% 1.1% 0.0% 0.0% 1.1% 


* Please refer to page 23, ‘Asian manufacturers – A deep dive’, for a detailed discussion. 

19 July 2016 6

Feeling the PRD pulse 

Kelvin Lau +852 3983 8565 







Standard Chartered Bank, Singapore Branch



PRD manufacturers reflect the 

challenges China faces as its 

economy transforms 

China through the PRD lens 

The slow, painful economic transition continues 

We conducted our seventh annual survey of PRD manufacturers between February 

and March 2016, with responses from close to 290 Hong Kong-based and Taiwanbased 

manufacturers operating in the PRD. Our clients tell us that 

 

 

 

 

the labour shortage is marginally less severe, and that wage growth (and 

expectations thereof) is relatively steady despite a slowing economy; 

there is greater divergence in workforce utilisation among manufacturers, but 

there are also more wage negotiations with workers; 

pessimism is rising, while orders appear more difficult to come by; and 

a weaker CNY is having a mixed impact on PRD manufacturers. 

It is through the PRD lens that we get a glimpse into China’s ongoing economic 

transition. Higher wages are an integral part of the country’s structural shift towards a 

consumption-driven, services-oriented growth model. Wage increases can also be 

justified and absorbed by productivity growth. The likelihood of nominal wages 

increasing almost 8% on average this year – similar to last year – should, therefore, 

be good news, although it comes at the expense of manufacturers. 

Our survey shows that persistent wage pressure will likely further compress 

manufacturers’ margins, explaining the increase in policy support to the struggling 

corporate sector. Provinces have been allowed to hike minimum wages at a slower 

rate and to lower social security payments by companies. 

Respondents also generally expect to benefit from the ‘Belt and Road’ and ‘Made in 

China 2025’ initiatives. Meanwhile, manufacturers who want to control costs continue 

to favour investing in automation; a growing minority is looking to move capacity out 

of China. We note here that our surveyed clients are likely among the more 

successful PRD firms. This may skew the results somewhat; things probably look 

bleaker beyond our sample. However, allowing weaker manufacturers to fail has 

been, and will continue to be, a key part of China’s much-needed transformation. 

Figure 1: Wages set to rise 7.7% in 2016 vs 7.8% in 2015 

Actual and expected wage increase, % of respondents 

Figure 2: Is labour shortage better or worse than before? 

% of respondents 

Others 

Up 20% 

More difficult 

2016 

2015 

Up 15% 

Up 10% 

Up 5% 

No change 

2016 

2015 

Same 

Less difficult 

0% 10% 20% 30% 40% 50% 


0% 10% 20% 30% 40% 50% 60% 


19 July 2016 8

2015 



Wages are still rising, despite 

easing expectations 

Gauging the challenges, starting with wages 

Wage expectations on a multi-year downtrend 

On the face of it, wage growth pressure has barely eased despite a slowing 

economy. Our respondents say they are raising (or planning to raise) wages by 7.7% 

on average in 2016, close to last year’s 7.8% (Figure 1). This is, however, down from 

increases of 8.1% in 2014 and 8.4% in 2013. Wage expectations are coming off at a 

faster rate, with 2016 being the first time that current-year wage expectations are 

lower than the prior year’s actual increase (Figure 3). This suggests increasingly 

cautious sentiment among employers. On a same-company basis, 22% of 

respondents plan to raise wages more than they did last year, down from 26% prior; 

those who expect to raise them less stayed steady at 18% (Figure 4). 

Using official CPI inflation as a deflator, real wage growth is around 5.6% in 2016, 

down from 6.3% in 2015, 6.1% in 2014 and 5.8% in 2013. While not material enough 

to undermine China’s pursuit of more consumption-driven growth, this does soften 

the tone of an otherwise relatively steady headline wage growth story. 

The labour market is still tight; 

strong companies are getting 

stronger and more competitive 

Diverse workforce utilisation amid a labour shortage 

The PRD is still facing a labour shortage, which is keeping wages well supported. 

27% of our respondents say the labour shortage has worsened in the past 12 

months, versus 20% seeing less labour-market tightness. The 7ppt difference, 

however, is smaller than last year’s 15ppt, indicating an easing trend (Figure 2). 

Workforce utilisation shows a similar easing picture – 53% of respondents reported 

operating at 80-90% of their workforce, a material drop from 63% last year (Figure 5). 

In contrast, 18% of respondents are operating at 70% or less of their workforce, up 

from 15% in 2015, and 13% in 2014. Interestingly, the proportion of those reporting 

100% utilisation also rose, to 29% from 22% in 2015, either reflecting more nimble 

manufacturers getting leaner amid challenging times or more competitive 

manufacturers gaining market share at the expense of others. We think this is a sign of 

success for China’s transformation strategy – stronger companies moving up the value 

chain, despite the challenges of limiting the fallout of weaker companies folding as 

a result. 

Figure 3: Respondents expect milder wage growth 

acceleration than in the previous year, for the first time 

Actual and expected wage increase, this and past surveys 

9.5 

9.0 

8.5 

8.0 

7.5 

Current year 

expectation 

Prior year 

actual 

Figure 4: Wage growth, 2015 actual vs 2016 expectations 

% of respondents; blue shading indicates faster expected 

wage growth this year versus 2015 

No 

change 

2016 

Up 5% Up 10% Up 15% Up 20% 

No change 6.3% 3.5% 0.3% 1.0% 0.0% 

Up 5% 3.8% 30.4% 8.7% 1.0% 0.3% 

7.0 

6.5 

6.0 

2013 2014 2015 2016 


Up 10% 1.4% 4.5% 15.4% 5.9% 0.3% 

Up 15% 1.0% 0.3% 2.8% 4.2% 1.0% 

Up 20% 0.7% 1.0% 1.4% 1.4% 1.7% 


19 July 2016 9



Our respondents see diverse productivity growth. Wage increases can be justified 

and, more importantly, absorbed by productivity growth. In the absence of reliable 

official numbers, we gauge labour productivity growth by asking our respondents 

whether their per-worker output has increased more than wages (Figure 6). 62% of 

respondents agreed with this statement, down from 67% last year. A material and 

growing minority said productivity growth lagged wage growth. This reflects the 

companies’ varying abilities in boosting productivity to absorb rising wage costs (see 

‘Asian manufacturers – A deep dive’ for more details). On average, however, 

productivity growth remains adequate to limit the spillover of wage costs to prices of 

final goods. 

An ageing workforce is a small 

short-term blessing and a big longterm 

challenge 

A shrinking labour force poses long-term challenges 

China’s labour shortage persists because of shrinking supply rather than strong 

demand. The working-age population has been declining since 2012 and is likely to 

keep falling in the coming decades, even with the recent relaxation of the one-child 

policy (Figure 7). Various socioeconomic factors remain disincentives to having 

multiple children, including the soaring financial and opportunity costs of raising 

children, women’s growing role in the workforce and changing social expectations. 

While having less excess supply of labour helps during a downturn, longer-term 

challenges stemming from an ageing population loom. First, having fewer workers 

Figure 5: Workforce utilisation level 

% of respondents, this and previous surveys 

Figure 6: Has per-worker output risen more than wages? 

% of respondents, this and past surveys 

100% 

90% 

80% 

Yes, a lot 

Yes, a bit 

2016 

2015 

2014 

70% 

60% 

2016 

2015 

2014 

No 

0% 10% 20% 30% 40% 


0% 10% 20% 30% 40% 50% 60% 


Figure 7: Following Japan’s demographic footsteps 

Working-age population (aged 15-64), mn persons 

1,200 

UN projection 

1,000 

China 

800 

600 

400 

Japan (RHS) 

200 

0 

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 

Source: UN, Standard Chartered Research 

250 

200 

150 

100 

50 

0 

Figure 8: Old-age dependency has a long way to climb 

Population aged 0-14 and 65+ per 100 population 15-64, ratio 

100 

90 

80 

70 

60 

50 

40 

30 

Source: UN, Standard Chartered Research 

Total 

dependency 

ratio 

Old-age 

dependency 

ratio 

20 

Child 

10 

dependency 

ratio 

0 

1950 1965 1980 1995 2010 2025 2040 2055 2070 2085 2100 

19 July 2016 10

2015 



means lower long-term growth potential. Second, the economy needs to adapt to a 

new paradigm, one that requires less unskilled labour but can provide enough skilled 

jobs for the rising educated middle class. This adds urgency for China to pursue an 

industrial upgrade to skill-based high-end manufacturing, as well as the transition to 

modern services. Third, the social security burden (pensions, health care) that Beijing 

needs to bear will increase along with the old-age dependency ratio (Figure 8). This 

comes at a time when China is already taking on an inordinate amount of public debt 

from the private sector. 

No let-up in pressure on margins, 

orders and funding costs 

Corporates are pessimistic on the 

2016 growth outlook for both China 

and their partner countries 

The persistent margin squeeze and more 

Wages on average account for more than 20% of our respondents’ total cost base 

(Figure 10). A greater proportion of our respondents see a higher wage component 

than in 2015. With wages still rising as the economy slows, margins are bound to 

drop. Respondents expect margins to fall by an average 6.1% this year, from a drop 

of 0.4% last year. On a same-company basis, only 19% of respondents expect the 

change in margins to improve this year, while 22% expect margin changes to be 

worse than in 2015 (Figure 9). 

On the demand side, respondents expect orders to decline 7.6% on average in the next 

six months (Figure 11). 58% of respondents see weaker orders in the next six months, 

while 21% expect an improvement. This matches the widespread pessimism among 

respondents on the 2016 outlook for China and key overseas markets (Figures 13 

Figure 9: Margin change, 2015 actual vs 2016 estimate 

% of respondents; blue shading indicates those expecting better margin changes this 

year than last year 

Down 

30% 

Down 

20% 

Down 

10% 

2016 

No 

change 

Up 10% Up 20% Up 30% 

Down 30% 5.2% 0.7% 0.0% 1.0% 0.0% 0.7% 0.3% 

Down 20% 0.3% 5.9% 4.2% 1.4% 1.0% 0.3% 0.0% 

Down 10% 0.3% 5.6% 24.4% 4.2% 2.1% 0.7% 0.0% 

No change 0.0% 0.3% 6.6% 15.0% 2.1% 0.0% 0.0% 

Up 10% 0.0% 1.0% 2.1% 4.5% 6.3% 0.7% 0.0% 

Up 20% 0.0% 0.0% 0.0% 0.3% 1.0% 1.0% 0.0% 

Up 30% 0.0% 0.0% 0.0% 0.0% 0.3% 0.0% 0.0% 


Figure 10: What share of your total costs are wages? 

% of respondents, this and previous survey 

Figure 11: How do you see orders in the next six months? 


>50% 

40-50% 

1% 

13% 

11% 

2016 

2015 

+30% 

+20% 

+10% 

No change 

20-30% 

45% 

43% 

-10% 

-20% 

10-20% 

29% 

33% 

-30% 

-40% 

0-10% 

12% 

12% 

Others 

0% 10% 20% 30% 40% 



19 July 2016 11



and 12, respectively). The US, Europe and Middle East are the main overseas markets 

among those surveyed. 

In terms of credit, 46% of respondents reported that it is more difficult to borrow 

money now than in 2014, while only 8% said it has become easier (Figure 14). This 

is disappointing, considering the multiple rounds of policy interest rate and reserve 

requirement ratio (RRR) cuts since then. Monetary conditions were also kept 

accommodative throughout 2015 and in Q1-2016. Presumably, a slowing economy 

has turned banks more cautious on lending due to concerns over rising nonperforming 

loans. This finding also echoes our monthly tracker, which shows that 

funding costs have stayed high for small and medium enterprises (SMEs). The 

financing cost component of our proprietary SME Confidence Index has been 

persistently below the 50 neutral mark since late 2014 (Figure 15). 

In Q2-2016, we saw a slowdown in monetary and credit growth – reflecting a return 

to prudence and a renewed commitment towards deleveraging – give way to fiscal 

policy shouldering a larger easing burden. 

Survey echoes likely ‘L-shaped’ growth 

Our survey shows a reasonably stable labour market and healthy income growth, all 

things considered. This keeps consumption supported and should help China avoid a 

hard landing. However, a combination of lingering high wages and financing costs, 

Figure 12: What is your view on partner markets in 2016? 


45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

Negative 


Figure 14: How easy is it to borrow money now vs 2014? 


Moderately 

negative 

Neutral 

Moderately 

positive 

Positive 

Figure 13: What is your view on China in 2016? 

% of respondents, this and the 2015 survey 

50% 

40% 

30% 

20% 

10% 

0% 

Negative 

2015 

2016 

Moderately 

negative 


Neutral 

Moderately 

positive 

Figure 15: SMEs’ financing costs remain elevated 

Bank and non-bank financing cost components 

Positive 

Harder 

Same 

Easier 

0% 10% 20% 30% 40% 50% 


56 

54 

52 

50 

48 

46 

44 

42 

50 threshold 

Bank financing 

cost index 


Non-bank 

financing cost 

index 

40 

Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 

19 July 2016 12



weak orders, narrowing margins and widespread pessimism means tougher times 

still for an already over-leveraged China Inc. More defaults are likely on the horizon, 

especially if China is serious about its economic transformation goals. Indulging in 

the old habit of keeping zombie companies alive because of fallout fears would only 

hurt the growth rate in the medium term. 

Against this backdrop, the government’s growth target of above-6.5% for the next five 

years looks ambitious in the absence of additional policy stimulus. There seems to be 

policy space available for stimulus, but the leadership may not (and should not, in our 

view) be seeking a strong economic rebound given the sluggish global recovery and 

the need to cut capacity and deleverage domestically. An ‘L-shaped’ trajectory for 

China in the coming years, therefore, sounds appropriate to us. 

The government delivers policy 

relief for corporates 

Tackling the challenges, starting with the government 

Less of a push from minimum wage hikes 

PRD manufacturers generally do not mind statutory minimum wage hikes in the 

‘good times’; they tend to already pay above the minimum level and would hike 

wages given a demand-driven shortage at any rate. In challenging times, however, 

manufacturers become more sensitive – and vulnerable – to wage hikes. It is not 

surprising, therefore, that 15% of our respondents said minimum wage increases 

have had a ‘huge’ impact on wage levels, up from a mere 7% last year. Another 57% 

said that regulatory wage hikes have forced them to raise wages more than they had 

planned. 28% (down from 30% last year) said they would have hiked wages anyway, 

regardless of minimum wage changes. Minimum wage hikes do appear to have a 

growing impact on actual wages, especially for the least skilled part of the workforce, 

as economic headwinds increase. 

It is likely a relief to corporates that Beijing has taken a less assertive stance on 

mandating wage increases in its 13th Five Year Plan (FYP, 2016-20), calling only for 

‘rationally determined minimum wage rates’. This contrasts with the targeted 

minimum wage increases of ‘at least 13% a year on average’ in the government’s 

12th FYP (2011-15), during which the actual average increase was 13.1%. Starting 

this year, provinces have also been allowed to hike minimum wages only once every 

two to three years (from at least once every two years). So far this year, only seven 

provinces have hiked minimum wages by an average of 11% (Figures 16 and 17), 

versus last year’s average increase of 14.9% among 27 provinces. Chongqing hiked 

wages the most this year (20%) because of its lower base and because it did not hike 

in 2015 (unlike Shanghai and Tianjin, which tend to hike wages annually). 

Figure 16: Minimum wages in selected provinces/cities 

Top-tier minimum wage levels, CNY 

2,500 

Figure 17: Less urgency for provinces to hike minimum 

wages 

30 

Number of provinces that adjusted minimum wages 

2,000 

1,500 

2015 2016 

25 

20 

15 

Average 

minimum wage 

1,000 

10 

500 

5 

0 

Shanghai Tianjin Jiangsu Shandong Liaoning Chongqing Hainan 

0 

2011 2012 2013 2014 2015 2016YTD 

Source: Wen Wei Po, Standard Chartered Research 

Source: Sina Finance, Standard Chartered Research 

19 July 2016 13



Social security payments will likely 

be reduced in phases 

Relieving the corporate cost burden while protecting workers 

Statutory hikes are just one of the many drivers for higher wages. Pressure from 

collective wage bargaining, for example, has increased of late. 54% of respondents 

say they have had formal wage negotiations with worker representatives in the past 

six months (Figure 18) – up from 23% in 2015 and 24% in 2014. The pressure is for 

the authorities to keep promoting collective wage bargaining as a way to improve 

worker protection and calm labour tensions amid a slowing economy; additional relief 

for manufacturers will have to come from elsewhere. In addition to easier monetary 

conditions and a lower corporate tax burden through VAT reform, the authorities 

have also been lowering social security contributions that companies pay for their 

workers. We note again that reducing the corporate cost burden while protecting 

workers’ interests is a tough balancing act. 

Our prior surveys showed a long-running trend of local governments putting more 

pressure on companies to enrol migrant workers in social insurance schemes. 

Nowadays, payments to the five insurance categories (endowment, medical, 

unemployment, employment injury and maternity) and the housing provident fund 

account for 40% of a company’s wage bill if fully implemented. Last year, the 

authorities started to lower the contribution rates for unemployment (from a headline 

3% to 2%), employment injury (from an average of 1% to 0.75%) and maternity (from 

not more than 1% to 0.5%) insurance. 

The State Council announced more recently that the above insurance payments will 

be lowered further in the next two years starting from May 2016 (e.g., to 1.0-1.5% for 

unemployment insurance, within which workers’ contribution should be no more than 

0.5%). More importantly, the corporate contribution rate for workers’ endowment 

insurance and housing provident fund will also be reduced in phases. Lower 

contribution to worker endowment insurance, in particular, could provide the biggest 

cost relief, as it starts at the highest level. Provinces with endowment insurance at 

corporate contribution rates of more than 20% have to lower the rate to 20% in the 

next two years. Those already at less than 20% and sitting on a certain minimum 

endowment fund level can lower the rate to 19% in two years. A total of 21 provinces 

meet these criteria, and 16 provinces had already made the cuts as of early July, 

according to media reports. Mixed feelings towards CNY depreciation 

CNY depreciation expectations 

remain, but policy credibility is on 

the rise 

There is a common perception that China needs (or has to accept) a much weaker 

currency to help its struggling manufacturers and support growth. We asked our 

respondents how the CNY’s roughly 6% depreciation against the USD since mid- 

Figure 18: Have you negotiated wages in past 6 months? 

% of respondents, from this and previous surveys 

Yes 

No, but I think I will 

probably have to this year 

No , and I don’t think 

I will this year 


2016 

2015 

2014 

0% 20% 40% 60% 80% 

Figure 19: Impact of CNY depreciation on your business 


45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

Very negative 

Somewhat 

negative 


No change 

Somewhat 

positive 

Very positive 

19 July 2016 14



2015 impacts their business. 43% see a positive impact, versus 32% seeing a 

negative impact (Figure 19). Presumably, not all respondents are pure exporters that 

would benefit from a cheaper exchange rate; importers would probably see their 

purchasing power eroded by a weaker CNY, while those sourcing and/or selling 

domestically would be less exposed to the USD-CNY trend anyway. 

This mixed impact on manufacturers is one of the key reasons we think CNY 

depreciation is too blunt an economic relief tool. This is in addition to the well 

demonstrated impact of weak market confidence in the CNY on driving capital 

outflows. What Chinese manufacturers, much like global investors, need instead of a 

weakening currency is a credible and transparent currency regime that promotes a 

relative stable CNY over time, in our view. The good news is that markets have 

reacted much more calmly to swings in USD-CNY spot and fixing in recent months 

after a shaky start to the year. We think this reflects a better understanding of the 

CNY FX policy and the daily CNY fixing mechanism, which makes USD-CNY more 

responsive to broader USD moves and makes it move in a more predictable manner. 

More upside risks to USD-CNY in 

the short term 

Despite being the worst-performing Asian currency since the UK voted to leave the 

EU, the CNY’s drop against the USD has been modest compared with the declines in 

many G10 and other emerging-market (EM) currencies. So far, the authorities appear 

comfortable with allowing general USD strength to translate into higher USD-CNY 

spot and fixing. This has, however, led to further weakening in the CNY basket level 

to new lows – too much weakening could renew concerns about the credibility of the 

new FX regime, in our view. For now, we see no signs of post-Brexit market panic; 

the widening in the CNY-CNH basis has been limited. However, more upside risk to 

USD-CNY in the short term amid choppy global sentiment remains a concern. 

More than two-thirds of our respondents see the CNY depreciating further against the 

USD before the year-end, versus 9% for those expecting appreciation, reflecting 

even more pessimism compared with a year ago (Figure 20). The silver lining is that 

expectations on the extent of further depreciation are largely modest – only 15% of 

respondents see a depreciation of more than 5%. 

Figure 20: What is your outlook for the CNY against the 

USD until the end of the year? 

% of respondents, surveys from 2014-16 

120% 

100% 

80% 

60% 

Figure 21: What is your outlook for the CNY against the 

USD until end-2016? 


35% 

30% 

25% 

20% 

15% 

40% 

2015 

2016 

20% 

2014 

0% 

No material change Depreciate Appreciate 


10% 

5% 

0% 

5% 

19 July 2016 15



Automation is the more common 

corporate response; relocation has 

been more prevalent among lowend 

manufacturers 

The need for cost savings to be 

large enough to offset the potential 

loss in efficiency and other risks is 

probably the main reason only a 

minority still favours moving inland 

To invest or relocate, that is the question 

PRD manufacturers are responding to the prevailing challenges. We have long 

argued that a labour shortage and wage pressures can be positive for an economy if 

they force the right behavioural changes at the micro level. Companies willing to 

invest in improving their cost structure and competitiveness can benefit from new 

opportunities. The economy in turn gets a much-needed productivity boost, and the 

creation of high-end jobs helps absorb an increasingly educated workforce. It is, 

therefore, encouraging to know that investing more in automation and streamlining 

processes continues to be the preferred response to labour-shortage and wage 

pressures, cited by 48% of our PRD survey respondents (Figure 22). 

Our respondents are marginally less enthusiastic about investing more in capital 

equipment and in moving capacity inland compared with a year ago. 17% said they 

plan to move capacity inland, down from 20% last year and 28% in 2014. Outer 

Guangdong gets the most votes as the preferred destination under this option, 

reflecting respondents’ preference to stay close to their existing PRD operations 

(Figure 25). When asked what the advantages are for moving to their choice of inland 

provinces, ‘better labour supply’ comes out on top, reinforcing how the PRD’s 

persistent labour shortage and wage increases continue to force the hand of 

manufacturers (Figure 23). The fact that the second and third top choices are also 

cost-related confirms the pressure on margins. The main concerns in moving 

factories inland are under-development of transport and infrastructure, and poor 

labour productivity and quality (Figure 26); the need for cost savings to be large 

enough to offset potential loss in efficiency and other risks is probably the main 

reason only a minority still favours moving inland. 

Manufacturers who prefer to move production overseas are also a minority. 13% of 

respondents chose this option, with Vietnam and Cambodia once again the most 

favoured destinations as in prior years (Figure 24). We believe these choices indicate 

that companies considering relocating from China are mostly low-end producers in 

sectors such as textiles and garments. These top overseas destinations also happen 

to offer the biggest advantage over the PRD in terms of better labour supply; in 

contrast, their economic outlook, proximity to new buyers and potential free trade 

agreement (FTA)-related benefits do not seem to be significant influences. Underdeveloped 

transport and infrastructure are once again top concerns for Vietnam and 

Cambodia, while uncertain political/social outlooks and undeveloped legal systems 

Figure 22: How do you respond to labour shortages? 


Figure 23: Advantages for relocating to choice destination 

No. of respondents 

Invest more in automation/ 

streamlining processes* 

Better labour supply 

(quantity/quality) 

Attractive tax incentives 

Invest more in 

capital equipment 

Move capacity 

inland 

Move capacity 

out of China 

2016 

2015 

2014 

2013 

Other savings on non-wage 

business costs 

Better economic outlook 

Proximity to new buyers 

and customers 

FTA-related benefits (e.g. 

TPP, RCEP) 

Local housing policy 

Moving overseas 

Moving inland 

0% 10% 20% 30% 40% 50% 60% 70% 

0 10 20 30 

* Not an answer option before 2015; Source: Standard Chartered Research Source: Standard Chartered Research 

19 July 2016 16



appear almost as worrying as poor labour quality and productivity (see ‘ASEAN – 

The next PRD?; Opportunities for ASEAN’ for a more detailed analysis). 

A majority of the respondents see 

benefits from the ‘Belt and Road’ 

initiative 

Vietnam and Cambodia are the 

favoured overseas destinations 

The CLMV region (Cambodia, Laos, Myanmar and Vietnam), being the up and 

coming provider of low-cost production, is also the likely main beneficiary of China’s 

‘Belt and Road’ initiative, and is eager for funding to upgrade its transport and power 

infrastructure. As opposed to an FTA or multilateral investment treaty, the ‘Belt and 

Road’ initiative is more of an encompassing mission statement that aims to boost 

trade and investment growth through better infrastructure connectivity across Asia, 

extending to the Middle East, Africa and Europe. The initiative has the potential to 

channel China’s (and other countries’) savings and construction expertise to other 

countries to resolve their infrastructure bottlenecks. Our respondents generally 

expect ‘Belt and Road’ to benefit their business (56% of our sample), via higher 

overseas demand, new investment opportunities or greater access to new suppliers 

(Figure 28). 

Figure 24: If you plan to move capacity out of China, to where? 

Number of respondents 

30 

25 

20 

15 

10 

5 

0 

Vietnam Cambodia Myanmar Bangladesh Thailand India Philippines Indonesia Malaysia Sri Lanka 


Those planning to relocate within 

China prefer to stay close to the 

PRD 

Figure 25: If you plan to move capacity elsewhere in China, to where? 


Other places 

Henan, Hubei 

Yunnan, Guizhou 

Anhui, Fujian, Jiangxi 

Shaanxi, Gansu, Qinghai, Ningxia 

Jiangsu, Zhejiang, Shandong 

Tianjin, Hebei, Shanxi 

Hunan, Guangxi 

Chongqing, Sichuan 

Liaoning, Jilin, Heilongjiang 

Outer Guangdong 

0 5 10 15 


19 July 2016 17



Relocating overseas saves the most 

on wages 

A revival in private investment 

should add impetus to promising 

trends in automation and robotics 

We asked our respondents how much they would save with the given cost-saving 

options. Unsurprisingly, moving capacity to places like Vietnam and Cambodia saves 

the most on wages: almost 40% of respondents planning a move see savings of 20% 

or more, over twice as much (in terms of proportion of responses) as for other options 

(Figure 27). Automation is the second-highest, with 19% respondents expecting 

savings of 20% or more; however, automation also has a high proportion of lowsavings 

responses, indicating that its benefits go beyond just cost considerations. We 

think the strong inclination to automate is an encouraging sign that China’s much 

needed industrial upgrade is well underway. 

Automation, robotics and ‘Made in China 2025’ 

China extended its leading position as the number one sales market for industrial 

robots worldwide in 2015, increasing sales by 16% to 66,000 units, according to the 

International Federation of Robotics (IFR). While undershooting IFR’s original 

projection of 30% growth due to macro headwinds, China still materially outpaced the 

8% increase in global sales. China is set to overtake the EU and North America by 

2017-18 as the world’s biggest user of industrial robots in terms of operational stock, 

according to the IFR. Furthermore, the rise of robotics is just part of China’s story of 

rapid adoption of automation in manufacturing. 

By boosting productivity, automation both explains and absorbs high wages; it is also 

a reflection of the increasing complexity of the goods produced. China’s attempt to 

move up the manufacturing value chain requires a great deal of automation, to 

achieve accuracy and complexity in high-volume output at affordable costs (in 

electrical and electronics production, for example). It also reduces worker stress 

caused by repetitive, high-pressure work and can replace humans with machines 

where working conditions are unsatisfactory. 

China’s transition to high-end manufacturing would be even more remarkable in the 

absence of the current economic headwinds, which are curtailing private investment 

growth. Reflecting Beijing’s renewed fiscal push to stabilise growth, FAI by China’s 

SOEs grew a staggering 23.3% y/y from January-May, while private investment 

growth fell sharply to 3.9% y/y over the same period. The overbearing economic 

presence of SOEs tends to crowd out private investment, an issue we think can only 

be resolved via SOE reforms and banking-sector reforms. The good news is that 

Beijing has identified SOE reform as a policy priority, issuing a long-awaited reform 

blueprint in 2015. However, the chances of a quick boost to SOE efficiency or swift 

deleveraging remain low, in our view. Better risk-based pricing of bank loans and a 

fairer competitive environment are also crucial to boosting private investment. 

Figure 26: Concerns on relocating to choice destination 


Underdeveloped transport/infra. 

Poor labour quality and productivity 

Lack of proximity to suppliers 

Figure 27: How much would your response save you? 

Wage savings, % 

< 10% 10-20% 20-30% > 30% 

Move capacity overeseas 

High non-wage business costs 

Future high wage inflation 

Uncertain political/social outlook 

Underdeveloped legal system 

Strong labour unions/labour laws 

Moving overseas 

Moving inland 

Move capacity inland 

More capital investment 

Automation/streamlining 

0 5 10 15 20 25 30 

0% 20% 40% 60% 80% 100% 



19 July 2016 18



10 priority sectors are set to benefit 

from the ‘Made in China 2025’ 

campaign 

The Chinese government introduced the ‘Made in China 2025’ campaign last year. 

The initiative aims to take China’s manufacturing sector to a new level, mainly 

through improving manufacturing innovation, fostering Chinese brands, enforcing 

green manufacturing, promoting breakthroughs in 10 key sectors, and promoting 

services-oriented manufacturing, among other objectives. The 10 key sectors are 

new information technology, numerical control tools and robotics, aerospace 

equipment, ocean engineering equipment and high-tech ships, railway equipment, 

energy saving and new energy vehicles, power equipment, new materials, biological 

medicine and medical devices, and agricultural machinery. 

57% of our respondents see themselves benefiting from ‘Made in China 2025’. Of 

this percentage, 29ppt expect to benefit from the rising domestic content of core 

components and materials (Figure 29), 16ppt see benefits through faster innovation, 

technology and intellectual property (IP) development, and 12ppt see gains from 

operating in one of the priority sectors likely to receive policy support. China’s push 

for an industrial upgrade should help partially cushion the negative impact of a further 

exodus from low-end manufacturing. The key is to complement the ‘Made in China 

2025’ campaign with initiatives encouraging other types of industrial upgrading 

beyond the 10 priority sectors, say via more R&D spending, best-practice sharing, 

and higher involvement of private investors and start-ups. 

Figure 28: Do you expect to benefit from the ‘Belt and Road’ initiative? 

(% of respondents) 

22% 21% 14% 

Yes Yes, it should broaden our range of suppliers Yes, it should help boost demand from 

Yes, it should create new 

overseas 

investment opportunities 

overseas 



44% 

0% 10% 20% 30% 40% 50% 60% 


Figure 29: Do you expect to benefit from the ‘Made in China 2025’ campaign? (% of respondents) 

Yes 

Yes, we should benefit from rising domestic content of core 

components and materials 

29% 16% 12% 


support as we are in one of the 

priority sectors 

Yes, we should benefit from 

faster innovation, technology 

and IP development 



43% 

0% 10% 20% 30% 40% 50% 60% 


19 July 2016 19

Asian manufacturers – A deep dive 





Kelvin Lau +852 3983 8565 



Standard Chartered Bank (HK) Limited

A deep dive 


This year, we dig deeper into key 

factors driving decision making in 

different industries 

How the manufacturers differ 

Divergence in preferences due to structural dissimilarities 

Analysing the responses from an industry perspective enables us to drill deeper into 

what drives our respondents’ choices, and provides insights into the key factors 

driving the decision-making process in different industries. This year, our survey 

respondents were split between low-end electronics manufacturing, high-end 

electronics manufacturing and non-electronics manufacturing. Our respondents were 

involved in semiconductor fabrication, component manufacturing, semiconductormanufacturing 

equipment and electronics packaging assembly; non-electronics 

manufacturers were in garments, footwear and other accessories, and jewellery, 

among others. 

Wages make up an average of 

22.5% of manufacturers’ total costs 

Wages still constitute a material proportion of manufacturers’ total costs. Our clients 

estimate that total wages account for an average of 22.5% of their total costs, up 

from 21.9% last year. This year, we obtained further insights into the cost structure of 

manufacturers in different fields. 

Figure 1: What share of your total costs are wages? 


>50% 

40-50% 


Semiconductor manufacturing equipment 


Electronics packaging assembly 


20-30% 

10-20% 

0-10% 

0% 10% 20% 30% 40% 50% 60% 


Figure 2: What is your expected wage increase? 


70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 



Non-electronics manufacturing 



Component manufacture 

No change Up 5% Up 10% > 15% 

Figure 3: Component manufacturing and fabrication see 

biggest wage increases; expected wage increase for 2016 

All manufacturers 

Semiconductor 



manufacturing 


assembly 

Semi conductor 

fabrication 



6.0% 

6.4% 

7.7% 

7.6% 

9.2% 

9.4% 

5% 6% 7% 8% 9% 10% 

19 July 2016 21

A deep dive 


Firms involved in electronics packaging assembly reported that wages accounted for 

an average 24.2% of their total costs, against 21.7% for fabrication and 20.8% for 

semiconductor manufacturing. Non-electronics manufacturers said wages made up 

only 21.9% of their total costs, again more than in more value-added electronics 

manufacturing but, surprisingly, less than low-end electronics assembly. 

Semiconductor fabricators expect 

the highest wage increase in the 

PRD in 2016, of 9%... 

Corporates involved in semiconductor fabrication and component manufacturing see 

the highest increases in wages this year, of over 9% y/y. Those involved in 

manufacturing of semiconductor equipment estimated lower increases, of around 6% 

y/y. This alone, however, does not necessarily imply that firms reporting low wage 

increases now generally have lower cost pressures – they may simply have been 

ahead of the curve and increased wages in previous years in response to earlier 

pressures. Another potential reason higher-end manufacturers see more wage 

increases this year is that wage pressure on them has been delayed, as their labour 

force is more skilled and likely at higher wage levels already. Future surveys and indepth 

conversations with clients should shed more light on our hypothesis. 

… and they also saw the biggest 

increase in worker productivity 

Worker productivity also differed significantly between industries; almost 75% of 

manufacturers in semiconductor fabrication said that per-worker output had risen faster 

than wages, either slightly or significantly. In contrast, less than 50% of non-electronics 

manufacturers saw worker productivity increase faster than wages. A more productive 

Figure 4: Workforce utilisation level 


100 

% 

90% 

80% 

Figure 5: Non-electronics manufacturers have a fuller 

workforce, % of respondents 


manufacturing 

Semiconductor 



assembly 

70% 

60% 

Non-electronics manufacturing 




Component manufacturer 



0% 10% 20% 30% 40% 50% 



83% 84% 85% 86% 87% 88% 

Figure 6: Has per-worker output risen more than wages? 


Figure 7: What cost savings do you expect? 


Yes, a lot 

Semiconductor mftg equipment 





Total 

Move capacity out of China 

14.8% 

21.1% 

Yes, a bit 


15.2% 


automation/streamlining processes 

14.0% 

No 

Invest more in capital equipment 

12.6% 

0% 20% 40% 60% 

0% 5% 10% 15% 20% 25% 



19 July 2016 22

2015 

2015 

2015 

2015 

A deep dive 


workforce, combined with higher margins, enables these manufacturers to better 

absorb cost pressures, contributing to higher wage increases. 

Worker utilisation is similarly high 

among all industries 

Streamlining/automation is the 

favoured workaround to tackle a 

labour shortage 

Average workforce utilisation among manufacturers in the PRD is over 86%, higher 

than in previous years. The variation in workforce utilisation between manufacturers 

in different industries is marginal; component manufacturers report the lowestcapacity 

workforce, at 85%. At the other end of the spectrum, non-electronics 

manufacturers report the highest utilisation rate, at 87.2%. 

More manufacturers prefer moving out of China than in previous years 

Our respondents agreed unanimously that streamlining their processes/investing in 

automation was the most favourable workaround to tackle the rising labour shortage, 

with almost one in two respondents choosing that option. After that, respondents 

were split between investing in capex and moving operations to a different location. 

Semiconductor equipment manufacturers and those involved in fabrication opted for 

investing in capex, while other manufacturers preferred moving operations – either to 

other parts of China, or out of China. 

Figure 8: Component manufacturers – Wage growth, 2015 

actual vs 2016 expectations 


wage growth this year vs 2015 

2016 

Figure 9: Electronics packaging assembly – Wage 

growth, 2015 actual vs 2016 expectations 



2016 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No 

change 

Up 5% Up 10% Up 15% Up 20% 

No change 4.7% 0.0% 0.0% 3.1% 0.0% 

Up 5% 4.7% 14.1% 9.4% 1.6% 0.0% 

No change 9.7% 3.2% 0.0% 1.6% 0.0% 

Up 5% 4.8% 35.5% 6.5% 1.6% 0.0% 

Up 10% 1.6% 3.1% 21.9% 7.8% 1.6% 

Up 15% 0.0% 1.6% 4.7% 9.4% 0.0% 

Up 20% 1.6% 1.6% 3.1% 1.6% 3.1% 

Up 10% 1.6% 0.0% 12.9% 8.1% 0.0% 

Up 15% 0.0% 0.0% 1.6% 4.8% 1.6% 

Up 20% 0.0% 1.6% 1.6% 1.6% 1.6% 



Figure 10: Semiconductor fabrication – Wage growth, 

2015 actual vs 2016 expectations 



No 

change 

2016 

Up 5% Up 10% Up 15% Up 20% 

No change 5.3% 5.3% 0.0% 0.0% 0.0% 

Up 5% 0.0% 23.7% 13.2% 0.0% 2.6% 

Up 10% 0.0% 5.3% 21.1% 7.9% 0.0% 

Figure 11: Semiconductor manufacturing – Wage growth, 

2015 actual vs 2016 expectations 



No 

change 

2016 

Up 5% Up 10% Up 15% 

No change 8.3% 0.0% 0.0% 0.0% 

Up 5% 4.2% 45.8% 8.3% 4.2% 

Up 15% 0.0% 0.0% 2.6% 0.0% 2.6% 

Up 20% 0.0% 0.0% 2.6% 5.3% 2.6% 

Up 10% 4.2% 4.2% 8.3% 4.2% 

Up 15% 4.2% 0.0% 0.0% 4.2% 



19 July 2016 23

2015 

A deep dive 


Moving overseas brought the 

largest cost savings, of over 21% 

Our survey respondents said moving manufacturing capacity overseas brought the 

largest savings, of over 21% on average. The next biggest savings were from moving 

inland, of c.15%. Investing in capex was expected to bring the least cost savings, of 

only an estimated 12.6%; moving manufacturing clearly appeared to be more 

attractive and more feasible for low-cost manufacturers. 

Of the 57% of respondents who reported benefiting from the ‘Made in China 2025’ 

campaign, a majority were in the semiconductor fabrication and equipment 

manufacturing business. Only around 20% of corporates in these industries saw no 

foreseeable benefit from the campaign. Over 50% of manufacturers in semiconductor 

fabrication expected to benefit from the rising domestic content of core components 

and materials; one-third of component manufacturers expressed a similar sentiment. 

More semiconductor fabricators see 

benefits from ‘Belt and Road’; nonelectronics 

manufacturers foresee 

no benefit 

Manufacturers involved in semiconductor fabrication or equipment manufacturing 

also see more benefits from the ‘Belt and Road’ initiative; only 15% of corporates in 

the former and just over 20% in the latter saw no benefit. However, a majority of nonelectronics 

manufacturers – over 60% – saw no foreseeable benefit either from 

‘Made in China 2025’ or ‘Belt and Road’. 40% of corporates in electronics packaging 

assembly also saw no foreseeable benefit from ‘Made in China 2025’, while almost 

50% saw no benefit from ‘Belt and Road’. 




streamlining processes 









0% 10% 20% 30% 40% 50% 60% 


Figure 13: Non-electronics – Wage growth, 2015 actual vs 

2016 expectations 



Figure 14: Is the labour shortage better or worse than 

before? 


No 

change 

2016 

Up 5% Up 10% Up 15% Up 20% 

No change 5.3% 6.3% 1.1% 0.0% 0.0% 

Up 5% 4.2% 37.9% 8.4% 0.0% 0.0% 

Up 10% 1.1% 8.4% 12.6% 3.2% 0.0% 


Semiconductor mftg 

equipment 

Component 

manufacturer 

Semiconductor 

fabrication 

More difficult 

Less difficult 

Up 15% 2.1% 0.0% 3.2% 2.1% 1.1% 

Electronics 

packaging assembly 

Up 20% 1.1% 1.1% 0.0% 0.0% 1.1% 



0% 10% 20% 30% 40% 50% 60% 

19 July 2016 24

A deep dive 


Figure 15: Do you expect to benefit from the ‘Made in China 2025’ campaign? 


Yes, we should benefit from rising 

domestic content of core components 

and materials 


support as we are in one of the priority 

sectors 

Yes, we should benefit from faster 

innovation, technology and IP 

development 






No foreseeable benefit for now 

0% 10% 20% 30% 40% 50% 60% 70% 


Figure 16: High-end manufacturers see more benefits from ‘Belt and Road’ on 

better overseas demand and opportunities, % of respondents 

Yes, it should help boost demand from 

overseas 

Yes, it should create new investment 

opportunities overseas 

Yes, it should broaden our range of 

suppliers 






No foreseeable benefit for now 

0% 10% 20% 30% 40% 50% 60% 70% 


Figure 17: Varying challenges prompt different reactions from manufacturers 

Industry 

Semiconductor 

manufacturing 

equipment 

Semiconductor 

fabrication 

Electronics 

packaging 

assembly 

Component 

manufacturing 


manufacturing 

Preferred 

response to 

labour shortage 

Automation/Move 

out of China 

More 

capex/Automation 

More capex/Move 

inland 

Automation/More 

capex/Move inland 

Automation/Move 

out of China 

Estimated 

wage rise 

for 2016 (%) 

Wages as 

a share 

of total 

costs (%) 

Expected 

change in 

orders over 

next 6 

months (%) 

Expected 

change in 

margins in 

2016 vs 

2015 (%) 

6.0 20.8 -10.8 -7.9 

9.2 21.7 -11.0 -7.2 

7.6 24.2 -9.8 -8.9 

9.4 22.7 -7.6 -5.5 

6.4 21.9 -4.0 -4.0 

All manufacturers 7.7 22.5 -7.6 -6.1 

Red is high, green is low and yellow is moderate; Source: Standard Chartered Research 

19 July 2016 25

A deep dive 


Figure 18: Where are your major business partners? 


Figure 19: How easy is it to borrow money, now vs 2014? 


ASEAN 

Emerging 

Asia 

Europe 

USA 

China 

0% 10% 20% 30% 40% 50% 60% 





Harder 

Same 

Easier 

0% 20% 40% 60% 







Figure 20: Impact of CNY depreciation on your business 


50% 

Very negative Somewhat negative No change Somewhat positive Very positive 

45% 

40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 



assembly 


manufacturing 


Semiconductor 


All manufacturers 




40% 

35% 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

Semiconductor 

fabrication 


+30% +20% +10% no change 

-10% -20% -30% -40% 

Component 

manufacturer 

Semiconductor 

mftg equipment 

Electronics 

packaging 

assembly 



% change from 2015 

0% 

-2% 

-4% 

-6% 

-8% 

-10% 

-12% 

-11.0% 

Semiconductor 

fabrication 

-7.6% 

Component 

manufacturer 


-10.8% 

Semiconductor 

mftg equipment 

-9.8% 

Electronics 

packaging 

assembly 

-4.0% 


19 July 2016 26

ASEAN – The next PRD? 





Edward Lee +65 6596 8252 




Tony Phoo +886 2 6603 2640 




Kelvin Lau +852 3983 8565 



Standard Chartered Bank (HK) Limited



One in seven manufacturers in 

China prefer to move their 

operations outside 

ASEAN – Poised to benefit 

Opportunities for ASEAN 

ASEAN is the preferred destination for manufacturing, outside China 

Relocating capacity outside China as manufacturing becomes more expensive in the 

PRD has become increasingly attractive over the years. While only 9% of clients 

were keen on moving their operations out of China in 2013, over 13% of respondents 

this year said they are keen on this option. The numbers seem low, partly because 

the survey only includes respondents who still have operations in the PRD region; 

manufacturers who have already moved their operating base outside the PRD, which 

would have boosted the share, are excluded. Nevertheless, we expect the share of 

corporates preferring to move out of China to increase along with rising wages in 

China as the country moves up the manufacturing value chain and other countries 

hone their manufacturing capabilities. Overall, the option to move capacity out of 

China has been the only increasingly preferred option in the past few years. 

ASEAN has consistently topped the list of preferred destinations among our clients 

who have expressed keenness to move their manufacturing operations out of China. 

Almost 80% of respondents preferred ASEAN as their manufacturing base, in line 



Figure 2: If you plan to move capacity out of China, to 

where? 



streamlining processes* 


capital equipment 

Move capacity 

inland 

2016 

2015 

2014 

2013 

Vietnam 

Cambodia 

Bangladesh 

Thailand 

India 

Philippines 

5% 

3% 

5% 

3% 

7% 

10% 

25% 

36% 

42% 

2016 

2015 

Move capacity 

out of China 

0% 20% 40% 60% 80% 

Sri Lanka 

Indonesia 

2% 

5% 

2% 

10% 

* Not an answer option before 2015; Source: Standard Chartered Research Source: Standard Chartered Research 

Figure 3: What are your cost savings from your potential 

action? 


Figure 4: What are your cost savings from moving out? 


Move out of China 


More capex 

Invest in automation 

21% 

19% 

15% 

17% 

13% 

2016 

14% 

2015 

14% 

12% 

Vietnam 

Cambodia 

Bangladesh 

Thailand 

India 

22% 

19% 

19% 

20% 

23% 

23% 

20% 

23% 

28% 

2016 

2015 

31% 



19 July 2016 28



with responses in the past several years. As China’s manufacturing sector becomes 

saturated, ASEAN’s is likely to grow. ASEAN is likely to benefit from comparatively 

low wage costs and abundant labour supply in the next 20 years. 

Over two in five chose Vietnam as 

their most preferred destination 

Moving capacity overseas provides 

the greatest cost savings 

Within ASEAN, Vietnam and Cambodia consistently stand out as the destinations of 

choice. 42% of respondents who prefer to move manufacturing out of China said they 

would move to Vietnam, a significant increase from the already-high 36% in 2015; 

25% chose Cambodia; 7% chose Bangladesh; and 3% India, a drop from 2015. 

Respondents estimated that moving operations out of China would provide the most 

cost savings of 21% of total costs, compared to 15% from moving to other parts of China 

and 13% by investing in further capex. In particular, our respondents estimated that 

Vietnam would provide an average cost reduction of 22%, higher than their estimate last 

year. Moving to Cambodia was estimated to save 20% on labour costs. Moving to other 

parts of Asia was also estimated to provide similar savings, ranging from 20-30% on 

average; clients said Bangladesh would provide 27.5% savings, on average. 

Non-electronics manufacturers 

prefer moving to ASEAN 

Manufacturing FDI in Vietnam 

increasing as Northeast Asia 

corporates move operations there 

Equipment and non-electronics manufacturers keen on ASEAN 

Semiconductor-equipment and non-electronics manufacturers among our survey 

respondents favoured moving out of China (Figure 7). 18% of non-electronics 

manufacturers saw moving out of China as attractive and 21% of semiconductor 

equipment manufacturers preferred this option. This is in line with our expectation. 

Non-electronics manufacturers – for whom wages make up a large chunk of total 

costs – have been moving operations out of China to more low-cost places like 

Vietnam, Bangladesh and Sri Lanka for a few years now. 

The move by electronics manufacturers is more recent, as evidenced by the 

increasing investment in the electronics manufacturing industry, primarily in Vietnam. 

Several big global electronics manufacturers have announced substantial investment 

in Vietnam. A significant portion of these investments are from the more advanced 

nations in Northeast Asia. Our South Korean and Taiwanese clients have been 

particularly keen on investing in Vietnam for a few quarters; we received similar 

feedback during our recent trip to Vietnam with Taiwanese investors (see ‘Vietnam – 

The emerging alternative for manufacturing’). South Korea and Taiwan are also 

among the biggest sources of FDI inflows to Vietnam, accounting for almost 50% of 

all inflows. 

Figure 5: Advantages of relocating to choice destination 


Figure 6: Challenges of relocating to choice destination 


Better labour supply (quantity/quality) 

Underdeveloped transport/infra. 

Attractive tax incentives 

Other savings on non-wage business costs 

Better economic outlook 

Proximity to new buyers and customers 

FTA-related benefits (e.g. TPP, RCEP) 


Vietnam 

Cambodia 

Myanmar 

Bangladesh 

Thailand 

0 5 10 15 

Uncertain political/social outlook 

Poor labour quality and productivity 

Underdeveloped legal system/ 

particular application of law 

High non-wage business costs 

Lack of proximity to suppliers 

Strong labour unions/ 

labour laws 

Wages are low now, but I am 

afraid of high wage inflation 


Vietnam 

Cambodia 

Myanmar 

Bangladesh 

Thailand 

0 5 10 15 

19 July 2016 29



The biggest attraction of moving production overseas, particularly to ASEAN, is the 

availability of better labour supply, both in terms of quality and quantity. This was the 

most-cited reason for moving out of China, to both the ASEAN region as a whole and 

to Vietnam and Cambodia individually. In addition, our respondents cited attractive 

tax incentives and other non-wage business cost savings – such as lower rents, land 

acquisition costs and energy costs – as key positives. 

ASEAN’s growing young and 

affluent population makes it an 

attractive demand destination 

Along with ample availability of cheap labour, ASEAN’s rising importance as a 

demand destination is also a significant driver of investment in the region. 

Manufacturers shifting production to ASEAN are positioning to capture a share of the 

region’s growing consumer market, which is being driven by high economic growth 

and a rising middle class. In addition to low operating and labour costs, the Mekong 

region offers a large and growing consumer market. The 10 ASEAN countries have a 

combined GDP of over USD 2.4tn; as a single bloc, ASEAN is the world’s eighthlargest 

economy and third-most populous market (after China and India). 

Vietnam’s affluent households are 

estimated to be the third-fastest 

growing in the world 

Vietnam’s affluent households – those with financial assets of USD 100,000 to USD 

2mn – will be the third-fastest-growing demographic globally from 2014-20, according 

to Economist Intelligence Unit (EIU) projections. The EIU estimates that the country’s 

affluent households will grow at a CAGR of 34.9% in 2014-20, ranking just behind 

India and Indonesia. Rising household wealth is expected to boost demand for 

better-quality goods and services, making Vietnam more attractive to investors. 

Vietnam’s involvement in regional 

trade pacts is an added incentive, 

according to our clients 

Furthermore, the perceived benefits from Vietnam’s involvement in several regional 

trade deals, including the Trans-Pacific Partnership (TPP) and the Regional 

Comprehensive Economic Partnership (RCEP), are an added incentive driving 

investment in the country, according to our clients. Vietnam’s involvement in trade 

deals was cited as the third-strongest reason for wanting to move there, while it was 

a relatively minor reason for moving to other parts of ASEAN. We forecast another 

spurt of increased investment in Vietnam as details of the TPP and the RCEP are 

ratified (see ‘ASEAN – The next PRD’ and ‘Vietnam – The emerging alternative for 

manufacturing’ for more details). 

Figure 7: Equipment and non-electronics manufacturers keen on ASEAN 

How do you respond to labour shortages? % of respondents 


Semiconductor 


Semiconductor 

fabrication 


assembly 

More capex 



Component 

manufacturing 


0% 10% 20% 30% 40% 50% 

19 July 2016 30



Further infrastructure development 

in ASEAN is crucial to removing 

bottlenecks and attracting more FDI 

Infrastructure investment is crucial to facilitate further capital inflows 

On the flip side, the region’s lack of well-developed infrastructure remains a major 

hurdle for companies to move to ASEAN. One in four respondents keen on moving 

out of China cited this as a major concern. Poor infrastructure is also likely to be a 

key reason for several corporates not considering ‘moving out of China’ as a viable 

option; this option might gain traction if infrastructure investment increases. We 

maintain that infrastructure development is critical for the region; without strong 

infrastructure, ASEAN economies will find it difficult to achieve their potential as an 

economic bloc comparable to China, in our view. The long-term shift in 

manufacturing requires both hard and soft infrastructure in order to succeed. 

Seamless transport infrastructure across ASEAN, in particular, is needed longerterm, 

although the important question of who will pay for infrastructure development 

remains. Vietnam has focused on the public-private partnership (PPP) model to 

develop infrastructure; its success could see the model replicated in the rest of 

ASEAN, particularly in the Mekong Delta region. We believe the ASEAN 

governments’ increased focus on infrastructure investment will make the region more 

attractive, with early movers standing to gain significantly. 

Figure 8: Moving capacity is attractive for firms trading 

with US, EU; Where are your major business partners? No. of 

respondents 

Figure 9: Where are your major business partners? 


Other 

ASEAN 




Other 

ASEAN 

Bangladesh 

Myanmar 

Cambodia 

Emerging Asia 

Emerging Asia 

Vietnam 

Europe 

Europe 

USA 

USA 

China 

China 

0 10 20 30 40 

0 5 10 15 



Figure 10: Firms that find borrowing harder prefer to 

move out; How easy is it to borrow money, now vs 2014?; 

no. of respondents 

Figure 11: How easy is it to borrow money, now vs 2014? 


Thailand 

Harder 

Harder 

Same 

Easier 




Same 

Easier 

Bangladesh 

Myanmar 

Cambodia 

Vietnam 

Thailand 

Bangladesh 

Myanmar 

Cambodia 

Vietnam 

0 5 10 15 20 25 30 35 



0 5 10 15 20 

19 July 2016 31



ASEAN’s favourable demographics 

should help attract investment in its 

new manufacturing centres 

ASEAN – Set to outperform in the next 20 years 

ASEAN countries are likely to become more attractive as they continue to invest in 

infrastructure, both physical and in terms of ease of doing business. Several ASEAN 

countries already perform well in the international rankings on business conditions. 

Given these advantages, we expect ASEAN to become a more important global 

exporter in the coming years. We believe Vietnam, in particular, is poised to become 

among the biggest beneficiaries of China’s move up the manufacturing value chain, 

as it combines the key attributes of ample availability of cheap labour and a growing 

affluent population with geographical proximity to China. Further infrastructure 

development across ASEAN is crucial to removing bottlenecks and attracting more 

FDI, in our view. 

Infrastructure spending across 

ASEAN has slowed in recent years 

Building hard infrastructure, removing bottlenecks and creating the right conditions to 

encourage FDI are important objectives, particularly for less-developed economies. 

The Asian Development Bank (ADB) estimates that ASEAN countries spent only 4% 

of GDP on infrastructure as of 2014, down from an average of 6% from 1980-2009. 

Although there is no specific optimal level of infrastructure spending, we think 5-10% 

of GDP is conducive to higher long-term growth. 

Figure 12: World Bank Doing Business rankings, 2016 

Table shows world rankings (1-189) in main index and selected sub-indices 

Ease of doing 

business 

Starting a business 

Dealing with 

construction permits 

Getting electricity 

Trading across 

borders 

Singapore 1 10 1 6 41 

Malaysia 18 14 15 13 49 

Thailand 49 96 39 11 56 

Brunei 84 74 21 68 121 

China 84 136 176 92 96 

Vietnam 90 119 12 108 99 

The Philippines 103 165 99 19 95 

Indonesia 109 173 107 46 105 

Cambodia 127 180 181 145 98 

Laos 134 153 42 158 108 

Myanmar 167 160 74 148 140 

Source: Doing Business (World Bank), Standard Chartered Research 

Figure 13: ASEAN is attracting more investment 

% of total FDI in ASEAN 

Brunei 2014 Average (2004 - 2013) 

Laos 

Myanmar 

Cambodia 

Philippines 

Vietnam 

Malaysia 

Thailand 

Indonesia 

Singapore 

ASEAN (% of Asia FDI) 

ASEAN (% of Global FDI) 

51% 

50% 

Source: UNCTAD, Standard Chartered Research 

0 5 10 15 20 25 30 35 

19 July 2016 32



ASEAN is likely to receive more FDI, 

even outside of Singapore 

ASEAN’s favourable demographics 

will help to attract investment in the 

region’s new manufacturing centres 

As FDI shifts to ASEAN from China, ASEAN may catch up with China’s current status 

as the world’s top exporter (Figure 15). ASEAN accounted for close to 7% of global 

exports in 2013, and this share has remained broadly stable for some time. China 

became the top global exporter in 2008-09 and currently accounts for close to 12% of 

global exports. Other major exporters – including the US, Germany and Japan – 

have seen their share of global exports decline gradually in recent years. 

ASEAN is positioned to benefit from the shift in investment from China as the latter 

loses cost competitiveness and its labour supply tightens (Figures 16 and 17). Most 

ASEAN countries (with the exceptions of Singapore and Malaysia) have significantly 

lower manufacturing wages than China. While wage costs may remain competitive in 

some parts of China, particularly in western China, the shrinking labour force means 

that wages are likely to catch up quickly with those in eastern China. 

In addition to low costs and abundant labour supply, ASEAN boasts high growth, a 

young workforce and an attractive investment climate. Some ASEAN economies 

Figure 14: Infrastructure development attracts more FDI 

Value of FDI inflows (2012-14), USD bn, ranked by 3-year average 

80 

70 

60 

50 

40 

30 

3YA 

20 

10 

2012 2013 2014 

0 

SG ID TH MY VN PH KH BN MM LA 

Source: UNCTAD World Investment Report, Standard Chartered Research 

Figure 15: ASEAN exporters may gain market share from China in the future 

% of global exports 

16% 

14% 

CN 

12% 

10% 

8% 

6% 

4% 

US 

DE 

ASEAN 

JP 

2% 

0% 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 

Source: WTO, Standard Chartered Research 

19 July 2016 33



(particularly Singapore, Malaysia and Thailand) perform well in international rankings, 

such as the World Bank’s Ease of Doing Business and the World Economic Forum’s 

Global Competitiveness Index (Figures 12 and 31). The rest have potential to improve. 

ASEAN overtook China in terms of inward FDI in 2013. While this is mostly 

concentrated in Singapore, other ASEAN economies will likely command a bigger 

share of FDI in the coming years (Figure 13). Most FDI goes into the manufacturing 

sector, reflecting the region’s positive attributes for investment in manufacturing 

facilities (Figure 18). 

Figure 16: ASEAN has cost advantages 

Monthly manufacturing wages, USD 

1,600 

1,400 

1,200 

1,000 

800 

600 

400 

200 

0 

SG CN MY TH PH ID VN LA KH MM 

Source: JETRO, Standard Chartered Research 

Figure 17: ASEAN benefits from labour-force growth 

Average annual labour contributions to GDP growth vs. trend 

growth, ppt 

2001-05 2006-10 2011-15P 2016-20P 2021-25P 2026-30P 

8 

7 

6 

Trend growth 

5 

4 

3 

2 

1 

0 

-1 

-2 

ID PH MY TH SG CN 

Source: IMF, Penn World Tables, Standard Chartered Research 

Figure 18: Manufacturing sector is the main beneficiary of FDI in ASEAN 

% of FDI 

Agriculture Mining Manufacturing Utilities Construction Services 

Vietnam Neg.* Neg. 67 12 Neg. 16 

Indonesia 8 14 39 10 Neg. 26 

Malaysia Neg. 30 40 Neg. Neg. 38 

Thailand Neg. Neg. 55 Neg. Neg. 40 

Philippines Neg. Neg. 42 Neg. 6 49 

Myanmar Neg. Neg 17 70 6 6 

Singapore Neg. Neg. 15 Neg. 5 80 

*Neg. = negligible (less than 5%); Source: Official websites, Standard Chartered Research 

Figure 19: FDI to Vietnam from Northeast Asia has 

increased in recent years (USD mn) 

Figure 20: Vietnam’s large working-age population is a 

key advantage (working-age population, mn) 

10,000 

9,000 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

South Korea Singapore Taiwan Japan Hong Kong 

Top 5 as 

share of total 

(RHS) 

2006 2008 2010 2012 2014 2016 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

80 

Vietnam 

70 

60 

50 

Myanmar 

40 

30 

Thailand 

20 

Cambodia 

10 

Lao PDR 

0 

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 

Source: CEIC, Standard Chartered Research 

Source: UNHP, Standard Chartered Research 

19 July 2016 34



ASEAN also has a demographic advantage. The median age of the region’s 

population was about 27 years as of 2013, much younger than China’s estimated 32 

years. ASEAN’s labour force should continue to grow in the next few decades, 

expanding by 70mn workers from 2010-30, according to UN projections. China’s 

labour force, in contrast, is expected to contract by almost 70mn. 

ASEAN has the potential to become 

an important global exporter 

Regional trade deals to cement ASEAN’s role as a key global player 

Manufacturing capabilities vary across ASEAN currently. The CLMV region and 

Indonesia provide low-cost production. Malaysia, Thailand and the Philippines have 

expertise in mixed manufacturing and electronics. Singapore has high value-added 

manufacturing expertise and strong intellectual property rights protection. To 

capitalise on its manufacturing capabilities, ASEAN needs to achieve better 

integration. In addition to infrastructure links, a common regional framework for 

investment regulations would make it much easier for companies to adopt a pan- 

ASEAN strategy, with operations located across the region. Regional trade deals like 

the TPP and the RCEP open up significant new markets for ASEAN. The emergence 

of the ASEAN Economic Community (AEC) should help cement ties between the 

local economies and better integrate the regional output. 

The AEC is based on four pillars: single market and production base, competitive 

economic region, equitable economic development, and integration into the global 

economy. ASEAN has been relatively successful in pursuing Pillar 4, which is to 

integrate the region into the global economy. ASEAN has multiple FTAs and is a key 

cog in global supply chains. Continued integration via AEC initiatives, the RCEP and 

the TPP should continue to reinforce ASEAN as an important trade partner within the 

global trade environment. 

Figure 21: Major FTAs in negotiations 

CANADA 

CHINA 

SOUTH 

KOREA 

JAPAN 

USA 

MYANMAR 

INDIA 

THAILAND 

CAMBODIA 

MALAYSIA* 

SINGAPORE* 

VIETNAM* 

LAOS 

PHILIPPINES 

BRUNEI* 

INDONESIA 

PERU 

AUSTRALIA 

ASSOCIATION OF SOUTHEAST 

ASIAN NATIONS (ASEAN) 

CHILE 

NEW ZEALAND 

TRANS PACIFIC PARTNERSHIP (TPP) 

REGIONAL COMPREHENSIVE 

ECONOMIC PARTNERSHIP (RCEP) 

*Are in both TPP and RCEP negotiations; Source: Standard Chartered Research 

19 July 2016 35



Much focus is centred on the TPP, a mega regional FTA negotiated between 12 

countries, of which four are from ASEAN. The 12 countries include Australia, Brunei, 

Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Japan, Singapore, the US and 

Vietnam. They account for about 40% of global GDP and about one-third of global 

trade. The TPP was signed by all 12 countries in February 2016 but will only be 

enforced after ratification by all the partners. 

The TPP could raise Vietnam’s GDP 

by 10ppt by 2030, the biggest gain 

among all members 

Within the TPP partners, Vietnam could be the biggest beneficiary. According to the 

World Bank, the TPP could boost Vietnam’s GDP by 10ppt by 2030, the biggest gain 

among all members. Vietnam should benefit from lower tariffs and non-tariff 

measures, and the migration of supply chains, as companies that sought to benefit 

from TPP arrangements will need to adhere to stringent rules of origin requirement. 

TPP members currently account for c.35% of Vietnam’s export destinations. 

Including countries that do not currently have either FTAs or Comprehensive 

Economic Partnerships (CEPs) with Vietnam, the TPP could double Vietnam’s trade 

reach in terms of GDP. The effect is largely due to the US being a part of the TPP. 

Figure 22: International reach if the RCEP is concluded 

By FTA members’ population, GDP, and trade (in multiples of own country population, GDP and trade, respectively) 

700 

140 

90 

600 

120 

80 

500 

100 

70 

60 

400 

80 

50 

300 

60 

40 

200 

40 

30 

20 

100 

0 

4.6 

SG MY TH VN PH ID ASEAN 

20 

0 

8.0 

VN PH SG MY TH ID ASEAN 

10 

0 

3.3 

PH VN ID TH MY SG ASEAN 


Figure 23: International reach if the TPP is concluded 

By FTA members’ population, GDP, and trade (in multiples of own country population, GDP and trade respectively) 

160 

180 

40 

140 

160 

35 

120 

140 

30 

100 

80 

60 

120 

100 

80 

60 

25 

20 

15 

40 

20 

5.4 

40 

20 

33.7 

10 

5 

5.6 

0 

SG MY VN ASEAN-4 

0 

VN SG MY ASEAN-4 

0 

VN MY SG ASEAN-4 


19 July 2016 36

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2010 

2030 

2050 

2015 

BN 

SG 

KH 

LA 

MY 

MM 

TH 

PH 

VN 

ID 

2025 



Figure 24: Significant growth in the urban population 

Mn 

400 

380 

360 

340 

320 

300 

280 

260 

240 

220 

200 

301 

0.1 0.6 1.0 1.2 4.8 4.8 7.2 

Source: IMF, Standard Chartered Research 

+69mn 

7.5 

9.2 

33.2 

371 

Figure 25: Rise in ASEAN’s urban population to dwarf 

current populations of major cities (mn) 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

78.9mn 

Incr. in 

ASEAN 

urban 

population - 

2020 

Shanghai Delhi Tokyo London New York 

Source: World Bank, Standard Chartered Research 

Total = 67.9mn 

Total = 25.9mn 

Figure 26: ASEAN is a key cog in the global supply chain 

ASEAN-6 exports to the world; % share of total 

Figure 27: ASEAN is providing more end demand 

ASEAN-6 imports from the world; % share of total 

22 

20 

18 

16 

14 

12 

Intermediate 

goods 

Consumption 

goods 

Capital goods 

72 

70 

68 

66 

64 

62 

60 

20 

18 

16 

14 

12 

10 

Consumption 

goods 

Capital goods 

Intermediate 

goods (RHS) 

78 

76 

74 

72 

70 

10 

1998 2000 2002 2004 2006 2008 2010 2012 2014 

58 

8 

1998 2000 2002 2004 2006 2008 2010 2012 2014 

68 

Source: UNCOMTRADE, Standard Chartered Research 

Source: UNCOMTRADE , Standard Chartered Research 

Figure 28: Indonesia and the Philippines are likely to see the largest increases in working-age population (mn) 

120 

100 

80 

60 

40 

60+ 15-60 0-14 60+ (RHS) 15-60 (RHS) 0-14 (RHS) 

350 

300 

250 

200 

150 

100 

20 

0 

50 

0 

Indonesia Malaysia Philippines Singapore Thailand Cambodia Lao PDR Myanmar Vietnam 

Source: UNHNP, Standard Chartered Research 

19 July 2016 37



Figure 29: Vietnam is a clear outperformer within ASEAN 

% share of total ASEAN-6 exports to the world 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

ID 

0 

1998 2000 2002 2004 2006 2008 2010 2012 2014 

ID MY PH SG TH VN 

Source: UNCOMTRADE, Standard Chartered Research 

VN 

TH 

SG 

PH 

MY 

Figure 30: Singapore and Malaysia have the highest infrastructure scores; Myanmar, Cambodia and Laos the lowest 

Scores on a scale of 1 to 10; calculated using international and local data 

Mekong Delta Region and peninsular economies 

Island & archipelago economies 

INS 

5 

10 UBN TPT 

MY 

INS 

10 UBN TPT 

5 

INS 

SG 

5 

10 UBN TPT 

BN 

INV 

TH 

0 

MM 

ELA 

INV 

0 

LA 

KH 

VN 

ELA 

INV 

ID 

0 

PH 

ELA 

TCN 

TCN 

TCN 

Source: Global Competitiveness Report, UN, CEIC, Standard Chartered Research 

Acronyms stand for: Urbanisation (UBN), transport (TPT), electricity access (ELA), telecommunications (TCN), investments (INV), and institutions (INS) 

Figure 31: Global Competitiveness Index, 2014-2015 

Scores are on a scale of 1 to 7; economies ranked according to overall score 

Overall score 

Institutions score 

Infrastructure 

score 

Overall rank in 

2014-15 (1-144) 

Overall rank in 

2013-14 (1-148) 

Singapore 5.65 5.98 6.54 2 2 

Malaysia 5.16 5.11 5.46 20 24 

Brunei 4.95* 4.96* 4.29* - 26 

Thailand 4.66 3.66 4.58 31 37 

Indonesia 4.57 4.11 4.37 34 38 

The Philippines 4.40 3.86 3.49 52 59 

Vietnam 4.23 3.51 3.74 68 70 

Laos 3.91 3.92 3.38 93 81 

Cambodia 3.89 3.25 3.05 95 88 

Myanmar 3.24 2.80 2.05 134 139 

Note: Brunei numbers from 2013-2014 Report; Source: The Global Competitiveness Report 2014-2015 (World Economic Forum), Standard Chartered Research 

19 July 2016 38



Reliance on cheap labour to attract 

firms is not sustainable 

Challenges – Technology could be a major disruptor 

Focus on low-cost labour is not a sustainable way forward 

The availability of cheap and plentiful labour is the biggest reason firms are motivated 

to move to ASEAN. This is not sustainable, however, as labour is not likely to remain 

cheap in these countries forever. An even bigger threat comes from the increasing 

use of technology in manufacturing. Almost 50% of our respondents already choose 

investment in automation as their preferred way to tackle the rising labour shortage. 

Technology is set to become a major disruptor in manufacturing, in our view. 

Technology is likely to be the 

biggest disruptor in low-cost 

manufacturing 

Mundane and repetitive jobs, particularly in low-skill manufacturing, are prone to 

replacement by programmed machines and engineering advancements. The 

International Labour Organisation 1 estimates that 86% of all current jobs in Vietnam 

in textiles, clothing and footwear are at high risk of being replaced by automation; this 

is slightly lower than 88% for Cambodia, but higher than 64% for Indonesia. 

ASEAN should embrace technology 

in manufacturing sooner than later 

While the risk of a mass migration of manufacturing back to the West is not 

immediate, manufacturing firms have already started moderate ‘re-shoring’. ASEAN 

countries should learn from China’s experience and prepare to face these challenges 

sooner rather than later. A focus on skill-building and technical competency, and 

creating a highly proficient labour force is critical. Investment in higher education and 

value-added vocational training is also essential longer-term. As the role of 

technology in manufacturing increases, highly skilled workers will be in increasing 

demand; nations that focus on skill-building today will reap the benefits in the not-toodistant 

future. 

Figure 32: China’s productivity looks strong within Asia 

Average annual ppt contribution to GDP growth from 

productivity (TFP), by decade 

5 

CN IN HK TW US KR SG JP 

4 

Figure 33: China to become the biggest user of industrial 

robots by 2017, overtaking the EU and North America 

Estimated operational stock of industrial robots, ’000 units 

700 

2018 

600 

3 

500 

2 

1 

0 

-1 

-2 

-3 

1981-1990 1991-2000 2001-2013 

400 

300 

200 

100 

0 

2014 

China EU_5 North America 

Source: Penn World Tables, Standard Chartered Research 

Source: IFR World Robotics 2014, Standard Chartered Research 

1 International Labour Organization – ASEAN in transformation – How technology is changing jobs and enterprises, July 2016 

19 July 2016 39



We visited contract manufacturers 

in Vietnam along with our 

Taiwanese clients 

Vietnam – The emerging alternative for manufacturing 

On-the-ground views – Positive affirmation from Taiwan manufacturers 

Taiwan corporates appear generally positive about Vietnam’s growth prospects, we 

learned during our recent visit to eight Taiwan manufacturers with production facilities 

in the Binh Duong and Dong Nai provinces near Ho Chi-Minh City (HCMC). We 

visited mainly export contract manufacturers of international brands in household 

furniture, footwear, textiles and garments, chemical materials, travellers’ bags, and 

screws and fasteners. All eight producers indicated that they had either increased 

investment in the past year and/or planned to further expand production capacity in 

the next 12 months, as they expected revenues and/or margins to improve in the 

next few years. 

Taiwanese manufacturers optimistic 

on Vietnam outweigh those who are 

not by 3-to-1 

Our Taiwan clients’ optimism over Vietnam’s outlook is consistent with the latest 

results of our 2016 PRD manufacturers’ survey. More than 45% of Taiwan 

manufacturers we polled are generally optimistic on ASEAN’s outlook, three times 

the 15% who were not optimistic. Importantly, Vietnam stood out as the top choice of 

destination to move production capacity out of China; this is unsurprising, as Vietnam 

has seen a surge in FDI from Taiwan in recent years. 

Taiwan FDI in Vietnam doubled y/y 

in 2015 

One-third of Taiwan’s approved FDI 

in Asia ex-China is in Vietnam 

Total approved FDI from Taiwan rose to USD 1.2bn in 2015, twice the USD 646mn 

recorded in 2014, according to Ministry of Economic Affairs (MOEA) data. 

Significantly, however, nearly 70% of Taiwan’s approved FDI to Vietnam (i.e., USD 

5bn) occurred over 2011-15. Vietnam also accounted for almost one-third of 

Taiwan’s approved FDI in Asia, excluding China – almost twice the 17% recorded 

during 2000-10 – indicating that Vietnam has been a major recipient of Taiwan FDI in 

the past five years. 

FDI data from Vietnam supports our finding that Taiwan manufacturers are 

increasing investment allocation to Vietnam. Based on data for H1-2016, Taiwan is 

the third-largest source of FDI in Vietnam. South Korea tops the table, accounting for 

almost 42% of total registered FDI in Vietnam in H1-2016. Importantly, FDI from 

Taiwan has been rising steadily in the past few years, and should continue to 

increase further in the next few years. 

Taiwan is now the third-largest FDI 

source for Vietnam 

Figure 34: Taiwan moves up the ranks on FDI in Vietnam 

Registered capital; % of total 

45 

2012-2014 2015 H1-2016 

40 

35 

30 

25 

20 

15 

10 

5 

0 

South Korea Singapore Taiwan Japan Hong Kong China Malaysia 


19 July 2016 40



Vietnam will likely attract many lowcost, 

labour-intensive Taiwan 

export manufacturers 

Taiwan investors continue to be attracted to Vietnam due to its relatively low wages 

and ample labour supply. The average monthly wage for production workers in Binh 

Duong province is USD 200-300, significantly below the average USD 700-800 

earned by their mainland China counterparts. Furthermore, our clients mentioned 

that the recent rapid gains in the average monthly wages of production workers – by 

10-15% per year – is also partly offset by improving productivity. This suggests that 

Vietnam will likely attract many low-cost, labour-intensive Taiwan export 

manufacturers seeking a low-cost manufacturing base outside mainland China. 

This corresponds with our 2016 PRD manufacturers’ survey, in which 21 of 34 

Taiwan manufacturers polled indicated total wage-cost savings of over 10% through 

relocation overseas. Our Taiwan sample also has a larger share of non-technology 

corporates (22 out of 34) – 64% of the total, against 33% of the total survey 

population. This indicates a stronger desire among low-cost, labour-intensive Taiwan 

producers to move out of China. 

Vietnam’s continuing efforts to actively participate in and integrate into global/regional 

trade is also a major lure for many Taiwan corporates looking to invest there. Indeed, 

all our eight Taiwan clients indicated varying degrees of tariffs and/or duty-free 

advantages for exports to the EU due to the Generalised System of Preferences 

(GSP). This is likely to be further enhanced by Vietnam’s membership of the TPP. 

Coupled with the continued clustering of key supply chains, several of our Taiwan 

clients – especially in garments and textiles, and footwear – believe Vietnam will be a 

choice destination for many Taiwan export manufacturers seeking an alternative 

production base outside China. Our Taiwan clients’ optimism over Vietnam also 

reflects doubts among Taiwan investors about the potential benefits from China’s 

recent ‘Belt and Road’ and ‘Made in China 2025’ policy initiatives, according to the 

results of our 2016 PRD manufacturers’ survey (Figure 36). 

There are also some concerns… 

Vietnam will have to further upgrade its infrastructure if the economy is to continue to 

benefit from rising FDI and surging external trade. Nearly all our Taiwan clients 

mentioned that handling capacity at major cargo terminal remains adequate. Their 

main concerns were increasingly common congestion at the terminals and a longer 

custom clearance period in peak seasons and around major public holidays, causing 

Figure 35: Taiwan investors generally expect over 10% 

wage savings through relocation 


Wage savings 

greater than 30% 

Figure 36: Taiwan clients are less positive on China’s 

‘Belt and Road’ and ‘Made in China 2025’ initiatives 


25 

Belt and Road 

Made in China 2025 

20 

Wage savings 

between 20% and 

30% 

15 

10 

Wage savings 

between 10% and 

20% 

Wage savings less 

than 10% 

0 5 10 15 20 

5 

0 



Yes, it should 

broaden our range 

of suppliers 

Yes, it should 

create new 

investment 

opportunities 

overseas 

Yes, it should help 

boost demand from 

overseas 



19 July 2016 41



Vietnam’s long coastline increase 

its attractiveness 

disruptions to production schedules and/or delayed shipments. 

Vietnam’s 3,400km-long coastline and location in the South China Sea – one of the 

world’s busiest maritime routes – increase its attractiveness. The country has 

developed several ports in HCMC, Haiphong and Danang. Investment in developing 

sea ports, while forthcoming, has been dispersed across multiple locations without a 

focus on developing a single port to world-class standards. Nevertheless, the port in 

HCMC ranks among the top 25 in the world. 

The clustering of supply chains in key industrial parks and nearby areas is beginning 

to result in constraints on some key resources. For example, our Taiwan clients 

located in Dong Nai province mentioned that it is less easy to find workers than 

previously. The growing number of foreign investors with major international brand 

names has attracted a large number of workers living nearby and driven up monthly 

wages. As a result, many smaller and less-established producers are forced to look 

further out to meet hiring demand, resulting in higher recruitment expenses and 

maintenance costs, as they have to keep up with the market’s ‘going rates’. 

Clients are not overly concerned 

about rising wages in Vietnam, as 

they remain among the region’s 

lowest 

Rapidly increasing wages, albeit currently low, were also highlighted as a general 

concern. According to our clients, wages have been rising by about 10-15% per year. 

Wages in Vietnam remain manageable currently, compared with regional 

competitors. An average manufacturing worker in Vietnam earns about USD 185 per 

month, according to a Japan External Trade Organisation (JETRO) 2015 survey. 

This puts Vietnam roughly in the middle of the regional wage spectrum. Wages 

increased by about 10% in 2015, broadly in line with our clients’ feedback of 10-15%. 

Clients are not yet overly concerned about the level of wages, suggesting that it is 

still profitable to be based in the country. However, Vietnam will also need to 

eventually move up the value chain to justify higher wages. Using Malaysia as a 

guide and assuming wages in Vietnam and Malaysia rise about 10% and 5% per 

year, respectively, Vietnam will reach Malaysia’s wage levels in about 11-12 years. 

Figure 37: Wages in Vietnam are manageable but rising rapidly 

Labour costs in various cities, USD per month 

900 

Bangladesh Sri Lanka Cambodia Laos Vietnam 

800 

India Indonesia Philippines Malaysia Thailand 

700 

600 

500 

400 

300 

200 

100 

0 

Manufacturing - Worker 

Non-manufacturing - Staff 

Source: JETRO, Standard Chartered Research 

19 July 2016 42


Global Research Team 

Management Team 

Dave Murray, CFA +65 6645 6358 

Head, Global Research 

Dave.Murray@sc.com 


Marios Maratheftis +971 4508 3311 

Chief Economist 

Marios.Maratheftis@sc.com 

Standard Chartered Bank 

Thematic Research 

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Senior Economist, Thematic Research 

Madhur.Jha@sc.com 


Global Macro Strategy 

Eric Robertsen +65 6596 8950 

Head, Global Macro Strategy and FX Research 

Eric.Robertsen@sc.com 


Economic Research 

Africa 

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Chief Economist, Africa 

Razia.Khan@sc.com 


Victor Lopes +44 20 7885 2110 

Senior Economist, Africa 

Victor.Lopes@sc.com 


Sarah Baynton-Glen +44 20 7885 2330 

Economist, Africa 

Sarah.Baynton-Glen@sc.com 


Edward Cheng +44 20 7885 5284 


Edward.Cheng3@sc.com 


Emmanuel Kwapong +44 20 7885 5840 


Emmanuel.Kwapong@sc.com 


The Americas 

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Head, Economic Research, The Americas 

Mike.Moran@sc.com 

Standard Chartered Bank NY Branch 

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Senior Economist, US 

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Italo Lombardi +1 212 667 0564 

Senior Economist, Latam 

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Europe 

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Chief Economist, Europe 

Sarah.Hewin@sc.com 


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Economist, Europe 

Achilleas.Chrysostomou@sc.com 


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Senior Economist, Thematic Research 

Enam.Ahmed@sc.com 


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Macro Strategist 

Mayank.Mishra@sc.com 


Asia 

David Mann +65 6596 8649 

Chief Economist, Asia 

David.Mann@sc.com 


Southeast Asia 

Edward Lee Wee Kok +65 6596 8252 








Usara Wilaipich +662 724 8878 

Senior Economist, Thailand 

Usara.Wilaipich@sc.com 

Standard Chartered Bank (Thai) Public Company Limited 

Aldian Taloputra +62 21 2555 0596 

Senior Economist, Indonesia 

Aldian.Taloputra@sc.com 

Standard Chartered Bank, Indonesia Branch 

Jonathan Koh +65 6596 1262 

ASEAN Economist 

Jonathan.Koh@sc.com 


South Asia 

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Head, South Asia Economic Research 

Anubhuti.Sahay@sc.com 

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Economist, South Asia 

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Kanika Pasricha +91 22 6115 8820 

Economist, India 

Kanika.Pasricha@sc.com 


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Economist, Thematic Research 

Samantha.Amerasinghe@sc.com 


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Head, China Macro Strategy 

Becky.Liu@sc.com 


Greater China 

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Head, Greater China Economic Research 

Shuang.Ding@sc.com 


Kelvin Lau +852 3983 8565 




Betty Rui Wang +852 3983 8564 

Economist, NEA 

Betty-Rui.Wang@sc.com 


Se Yan +86 10 5918 8302 

Senior Economist, China 

Se.Yan@sc.com 

Standard Chartered Bank (China) Limited 

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Economist, China 

Lan.Shen@sc.com 


Tony Phoo +886 2 6603 2640 




Korea 

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Head, Korea Economic Research 

ChongHoon.Park@sc.com 

Standard Chartered Bank Korea Limited 

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Economist, Korea 

Kathleen.BN.Oh@sc.com 

Standard Chartered Bank Korea Limited 

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Senior Economist, MENAP 

Bilal.Khan2@sc.com 

Standard Chartered Bank (Pakistan) Limited 

Philippe Dauba-Pantanacce +44 20 7885 7277 

Senior Economist, Global Political Analyst 

Philippe.Dauba-Pantanacce@sc.com 


19 July 2016 43


FICC Research 

Rates Research Credit Research FX Research 

Kaushik Rudra +65 6596 8260 

Head, Rates & Credit Research 

Kaushik.Rudra@sc.com 


Nagaraj Kulkarni +65 6596 6738 

Senior Asia Rates Strategist 

Nagaraj.Kulkarni@sc.com 


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Senior Asia Rates Strategist 

Arup.Ghosh@sc.com 


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Asia Rates Strategist 

Lawrence.Lai@sc.com 


John Davies +44 20 7885 7640 

US Rates Strategist 

John.Davies@sc.com 


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Head, Africa Strategy 

Samir.Gadio@sc.com 


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Africa Strategist 

EvaWanjiku.Murigu@sc.com 

Standard Chartered Investment Services Kenya Limited 

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Head, Rates & Credit Research 

Kaushik.Rudra@sc.com 


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Head, Credit Strategy & Financials 

Shankar.Narayanaswamy@sc.com 


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Head, Asia Ex-China Corporate Credit Research 

Bharat.Shettigar@sc.com 


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Sovereign Strategist 

Jaiparan.Khurana@sc.com 


Simrin Sandhu +65 6596 6281 

Senior Credit Analyst, Financials & Head, ME Credit Research 

Simrin.Sandhu@sc.com 


Nikolai Jenkins, CFA +65 6596 8259 

Credit Analyst, Financials 

Nikolai.Jenkins@sc.com 


Zhi Wei Feng +65 6596 8248 

Head, China Corporate Credit Research 

Zhi-Wei.Feng@sc.com 


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Credit Strategist 

Melinda.Kohar@sc.com 


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Head, Global Macro Strategy and FX Research 

Eric.Robertsen@sc.com 


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Head, Asian FX Strategy 

Robert.Minikin@sc.com 


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G10 FX Strategist 

Eimear.Daly@sc.com 


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Senior FX Strategist 

Nick.Verdi@sc.com 


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Asia FX Strategist 

Eddie.Cheung@sc.com 


Lemon Zhang +65 659 69498 

Lemon.Zhang@sc.com 

Analyst, FX Research / Global Macro Strategy 


Commodities Research 

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Head, Commodities Research 

Paul.Horsnell@sc.com 


Nicholas Snowdon +44 20 7885 2276 

Metals Analyst 

Nicholas.Snowdon@sc.com 


Suki Cooper +1 212 667 0319 

Suki.Cooper@sc.com 

Precious Metals Analyst 


Priya Balchandani +65 6596 8254 

Energy Analyst 

Priya.Balchandani@sc.com 


Judy Zhu +86 21 6168 5016 

Metals Analyst 

Judy-Hui.Zhu@sc.com 


19 July 2016 44


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19 July 2016 45


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Document approved by 

David Mann 

Chief Economist, Asia 

Document is released at 

08:54 GMT 19 July 2016 

19 July 2016 47

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