Cheap Chinese Exports Put Southeast Asia's Factories and Jobs Under Pressure

From Muar to Bandung, manufacturers face a price squeeze

Chinese exports are putting manufacturers across Southeast Asia under growing pressure, from furniture workshops in Muar, Malaysia, to textile mills in Bandung, Indonesia, and electronics plants in Thailand. Cheaper imports are reaching the region as Chinese factories face weak demand at home, trade barriers in Western markets and new opportunities to sell directly to consumers online.

As of June 12, 2025, the strain reaches across furniture, clothing, steel, electronics and electric vehicles. Indonesian textile imports from China have recently reached a monthly record, while their shipment prices have been falling since early 2023. Local producers face a difficult combination: more competing goods arriving at lower prices.

China's surplus in manufactured goods, the amount its exports exceed its imports, rose from around US$1 trillion in 2018 to more than US$1.8 trillion in 2023. That represents an increase of more than US$800 billion, or more than 80%, in five years. Southeast Asia has become China's largest export market, ahead of both the United States and the European Union.

For consumers, inexpensive clothing, appliances and other products can stretch household budgets. For factories making competing goods, the same prices can mean thinner profits, fewer orders and lost jobs. Governments must also consider manufacturers that depend on Chinese machinery, parts and raw materials to produce their own exports.

Malaysia and Thailand have introduced taxes on inexpensive imports bought online. Indonesia is considering duties of up to 200% on imported fabrics and other goods. Across the region, officials are trying to protect employment while retaining access to affordable supplies and attracting Chinese investment.

How US tariffs redirect trade toward Southeast Asia

US tariffs on Chinese goods began under the Trump administration, continued under President Joe Biden and have reached as high as 145% in the latest escalation. A tariff is a tax on an imported product. It raises the cost of bringing that product into a country, making it harder for the seller to compete on price.

Direct Chinese exports to the United States have fallen sharply as those barriers have risen. Chinese manufacturers have sought other buyers, and Southeast Asia offers nearby markets, growing consumer demand and established trade agreements. Vietnam, Thailand and Indonesia have experienced sharp increases in Chinese imports, according to figures cited from Citigroup.

Factories in the region also face closer scrutiny over transshipment. This means goods pass through another country before reaching their final destination. Concerns focus on Chinese products being routed through Southeast Asia to avoid US tariffs, making the origin of a shipment a central issue in trade negotiations.

The United States is pressing Southeast Asian governments to tighten rules on certificates of origin. These documents identify where goods were made. For regional manufacturers, the pressure adds another task: maintaining access to foreign markets while showing where their products and production processes belong.

Why Chinese factories are pushing more goods abroad

China's export drive reflects economic problems at home. A weak recovery after the pandemic, a slump in real estate and subdued consumer spending have left factories able to make more than domestic buyers want to purchase. This excess production capacity encourages manufacturers to seek customers abroad.

Chinese companies have accepted very small profit margins, and sometimes losses, to keep production lines operating and workers employed. When many producers pursue export sales at the same time, buyers elsewhere gain access to large quantities of inexpensive goods.

In 2023, Chinese exports to the Association of Southeast Asian Nations, or ASEAN, rose by 12%, while ASEAN exports to China increased by just 2%. The uneven growth widened trade deficits with China and increased pressure on competing industries.

A large share of Chinese shipments consists of capital and intermediate goods. Capital goods are equipment used to make products, such as factory machinery. Intermediate goods are parts and materials used during production. These imports can help Southeast Asian businesses manufacture and export their own goods.

Consumer products also make up a substantial part of the flow, including clothing, shoes, electronics and furniture. Those shipments compete more directly with finished products made by local factories, often at prices regional manufacturers struggle to match.

Online shopping brings factories closer to consumers

Shopee, Lazada, Temu and TikTok Shop have made it easier for Chinese manufacturers to reach Southeast Asian customers directly. Selling through these platforms can bypass traditional shops and local distributors, reducing the number of businesses between a factory and its customer.

Indonesia's launch of TikTok Shop in 2021 was followed by layoffs across textiles, garments and footwear. Factories in Banten, West Java and Central Java have closed, with tens of thousands of workers losing their jobs. Factory managers cite inexpensive Chinese goods sold online as an important reason for falling sales and revenue.

Malaysia and Thailand have also recorded a surge in online purchases of inexpensive Chinese products. Both governments have introduced taxes intended to give domestic businesses a more equal footing: Malaysia through a sales tax and Thailand through value added tax on imports of low value.

Industry leaders say these measures have had limited effect so far because online vendors find ways around the regulations. For local producers, the competition therefore involves both the cost of manufacturing and the way goods enter the market and reach customers.

Furniture makers cut prices as competition spreads

Muar, Malaysia's furniture capital, illustrates the pressure on businesses that sell abroad as well as at home. Furniture export volumes have fallen substantially, and manufacturers including Natural Signature have cut prices and accepted smaller profits to compete with Chinese rivals.

Chinese furniture producers benefit from government support, tax rebates and efficient supply chains. A supply chain connects the businesses that provide materials, make components, assemble products and deliver them. When those connections work quickly and cheaply, a manufacturer can reduce costs throughout production.

Some Chinese furniture companies have also moved production to Vietnam, taking advantage of lower labour and raw material costs. Competition consequently reaches Malaysian manufacturers through both exports from China and factories established elsewhere in Southeast Asia.

Candice Lim is among the Malaysian furniture makers working to keep their businesses afloat by cutting prices and seeking new markets. Some producers are moving toward specialised products built around quality, customisation or sustainability. Malaysia is also shifting toward timber products certified as sustainable to appeal to international buyers.

Indonesia's textile crisis reaches workers and major companies

Indonesia's textile industry faces a combination of rising imports, falling import prices, factory closures and layoffs. Major companies including Sritex have entered bankruptcy, citing excess supply from China as an important factor in their difficulties.

The Indonesian Textile Association says much of the Chinese textile supply entering the market is imported illicitly. By avoiding taxes, those goods can undercut local producers by 20% to 30%. Legal import competition and goods entering outside the rules therefore present different enforcement problems for the government.

Kurniadi Eka Mulyana is among the workers who have lost jobs as textile factories close. The consequences extend beyond a company's accounts: a factory closure removes wages from workers and leaves households searching for another source of income.

New garment businesses are nevertheless emerging in rural areas. Some use social media to reach customers and seek export buyers in different markets. Their efforts show how producers are adapting, even as established factories struggle with falling sales and intense price competition.

Thailand faces pressure in appliances and electric vehicles

Thailand's electronics and household appliance manufacturers are also competing with more Chinese goods. Midea and TCL have increased marketing and price promotions, while small and medium sized local enterprises struggle to maintain sales.

Inexpensive Chinese air conditioners, fans and other appliances have contributed to factory closures and job losses. Smaller manufacturers face particular difficulties when larger competitors can combine low prices with extensive advertising and promotional campaigns.

Chinese electric vehicles are disrupting another major Thai industry, long dominated by Japanese manufacturers. Local suppliers of automotive parts have seen orders decline as the market changes. At the same time, Thailand wants investment in vehicle production, creating pressure to connect incoming manufacturers with domestic suppliers.

Thailand now requires electric vehicle manufacturers to use at least 40% local components. Some Chinese companies have pledged to increase local sourcing to meet that requirement. Buying more components locally can direct part of the spending associated with new vehicle production toward Thai businesses.

For local parts makers, the practical issue is whether investment produces orders they can supply. A vehicle assembly operation and the surrounding network of component manufacturers represent different sources of employment, even when they belong to the same industry.

Governments turn to taxes, duties and local purchasing

Southeast Asian governments are using several approaches to respond to import pressure. Indonesia is considering duties of up to 200% on fabrics and other imported goods. Malaysia and Thailand have introduced taxes on imports of low value bought online, while Thailand has adopted its local component requirement for electric vehicles.

Vietnam and Indonesia have imposed anti-dumping tariffs on certain Chinese products. Anti-dumping measures target imports sold at prices judged unfair under trade rules. Thailand is also monitoring imports more closely.

Several dates help explain how the pressure developed:

• 2018: China's surplus in manufactured goods stood at around US$1 trillion.
• 2021: TikTok Shop launched in Indonesia, followed by layoffs in textiles, garments and footwear.
• Early 2023: Prices of Chinese textile shipments began falling.
• 2023: China's manufactured goods surplus exceeded US$1.8 trillion. Its exports to ASEAN rose by 12%, while ASEAN exports to China grew by 2%.
• June 12, 2025: Regional governments faced mounting pressure to protect factories while preserving trade and investment ties.

Indonesia's proposed duties of up to 200% remain under consideration; no implementation date was given. Other measures already in use have different purposes, from collecting tax on online purchases to encouraging foreign manufacturers to buy local parts.

China points to the machinery and materials behind the trade

China rejects accusations that it is flooding Southeast Asian markets with goods at the expense of local industry. Its position centres on the role of machinery, components and materials in supporting production inside the region.

The Chinese Embassy in Thailand described the trading relationship in terms of shared economic benefit:

mutually beneficial and win-win

The embassy said consumer goods accounted for less than 10% of the total value of Chinese imports into Thailand. Its argument is that most imports help local businesses produce goods and add value, rather than simply competing for household purchases.

The Federation of Thailand Industry has described the influx of cheap imports differently, warning of a "tsunami". Industry groups in Malaysia and Indonesia express similar concerns about the volume and prices confronting domestic manufacturers.

The pressures vary by business. A Thai factory buying cheaper Chinese machinery may reduce its costs, while a nearby appliance maker may lose customers to imported finished products. Governments must account for both experiences when deciding which products to tax or restrict.

Investment brings opportunities, but local value matters

Chinese investment offers Southeast Asia opportunities for technology transfer, employment and more advanced manufacturing. As Chinese producers move into more sophisticated activities and establish operations in the region, local businesses may gain new customers and access to different production methods.

Governments also want Chinese investment in electric vehicles and renewable energy. Restricting imports while attracting those projects creates a difficult balance, particularly when the new factories initially depend on machinery and components from China.

Rebecca Sta Maria, former executive director of the Asia-Pacific Economic Cooperation Secretariat, argues that investment policy must examine how much economic activity stays in the host country:

What is the value-add of these investments? It has to be part and parcel of the industrial policy and the investment policy. Otherwise this will come back to haunt us.

Value added is the extra worth created through work such as processing materials, making components or assembling a finished product. For Southeast Asian governments, the practical concern is how investment translates into local wages, supplier orders, skills and production.

Responses proposed for the region include training workers, investing in technology, strengthening links between foreign investors and domestic suppliers, and expanding exports to the United States, Europe and other markets. The Regional Comprehensive Economic Partnership and the ASEAN-China Free Trade Agreement provide frameworks through which governments can pursue trade and investment priorities.

Cheaper goods and factory jobs pull policy in different directions

Inexpensive Chinese imports help restrain consumer prices, providing relief in economies where inflation has squeezed household budgets. The same imports can widen trade deficits with China and weaken businesses whose products face direct competition.

Factory closures and job losses can also create social strain and unrest. A lower price in a shop offers an immediate benefit to a buyer, while the loss of manufacturing work can damage the income of an entire household.

ASEAN's growing trade deficit with China sits alongside a strong trade surplus with the rest of the world. Tourism, digital services and logistics also offer opportunities for economic expansion as trade in services grows. The region's economic position therefore extends beyond its trade in manufactured products with China.

Broad import barriers carry costs of their own. When a local exporter must pay more for Chinese machinery, components or materials, producing its goods becomes more expensive. That can make it harder to compete in foreign markets, even if the barrier protects another domestic industry.

Escalating tariffs and other trade restrictions could also weaken regional integration. Southeast Asia's central challenge is to preserve the benefits of affordable supplies and investment while helping local manufacturers retain customers, improve production and keep workers employed.

Key Points

• Chinese manufacturers are directing more goods toward Southeast Asia amid weak demand at home, excess factory capacity and barriers in Western markets.
• China's surplus in manufactured goods rose from around US$1 trillion in 2018 to more than US$1.8 trillion in 2023.
• Furniture, textiles, electronics, appliances, steel and electric vehicles face growing competition, with factory closures and job losses across the region.
• Online platforms help Chinese producers reach consumers directly, while Malaysia and Thailand have taxed imports of low value bought online.
• Indonesia is considering duties of up to 200% on certain imports. Thailand requires electric vehicle manufacturers to use at least 40% local components.
• China says machinery and production materials support regional industry. Local manufacturers warn that inexpensive finished goods are squeezing sales and profits.
• Governments face competing demands: protecting jobs, keeping production costs manageable and ensuring new investment generates work for local businesses.