The economic choices of Southeast Asian countries in the context of industrial relocation

Southeast Asia has long been a key destination for China's industrial relocation, but in recent years, the way different countries in the region perceive and respond to Chinese industrial transfers has diverged. This study takes Malaysia, Vietnam, and the Philippines as specific case studies, explores these variations. The findings reveal that Southeast Asian countries adopt different policy approaches and perceptions towards Chinese industrial transfers, which can be categorised into three types of strategies: mild hedging, moderate hedging, and strong hedging. These policy differences are shaped by external security pressures and are closely tied to the political elites' methods of securing legitimacy. Countries that rely on performance legitimacy are generally more open to accepting Chinese industrial relocation and investment, while those whose legitimacy is grounded in procedural factors are more likely to reject such transfers. The cases of Malaysia, Vietnam, and the Philippines show that countries with stronger ties to the U.S. and other Western powers are more likely to pursue economic decoupling from China, given their access to alternative resources. Malaysia and Vietnam will keep accepting Chinese industry transfers, while the Philippines shifts from China to U.S.-Japan ties amid South China Sea tensions.