China’s economy has been all over the news recently, as stock prices in Shanghai crashed and worries of an economic slowdown in the world’s second biggest economy troubled investors around the world. One of the most important sectors of China’s economy in recent decades has been the manufacturing industry, and reports on the industry have not helped quell investors’ fears. China’s manufacturing sector has been contracting since the beginning of the year, and recently hit its lowest mark in three years. The poor manufacturing data could be an early signal of an economic shift in Asian manufacturing, as neighboring countries try to take advantage of the developments in China.

While China is the definite leader for manufacturing in Asia, the region boasts its own impressive numbers. Japan and South Korea both are top five countries in the world in terms of manufacturing output, and Asia as a whole made up 46.5% of global manufacturing output in 2013. Countries such as Thailand and Vietnam have been attracting manufacturing companies in recent years, with low wages and a large, young working population. A report several months ago by ANZ bank highlighted the growth potential of the ASEAN trade bloc, which strategically lies between the Indian and Pacific oceans, as well as the two most populous countries in the world. The report stated that the trade bloc has the potential to outplace China in manufacturing output by 2030 and become a major global player in the manufacturing sector.

The economic implications of the recent market volatility could loom large for the manufacturing sector in Asia. If China’s manufacturing sector continues to struggle, companies might look to shift operations to neighboring countries with more favorable economic conditions. China’s government has taken steps to combat the recent downturn, and the coming months will be an important indicator to countries throughout the region as to whether China can turn it around.

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