With China’s increasing direct investment in Southeast Asia, especially in manufacturing and infrastructure projects, Southeast Asian countries are becoming increasingly economically dependent on China. This dependence is evident in raw material supply, production technology, and market exports. Such reliance may lead to supply chain “contamination” with production activities not fully scrutinized and failing to meet international labor standards.
Despite Southeast Asia gradually becoming a global manufacturing hub, there are still deficiencies in supply chain transparency and regulation. This is particularly evident in special economic zones with tax reductions and lighter regulation, where production activities may not fully comply with local labor laws, increasing supply chain risks. Under the UFLPA law, any supply chain activities related to forced labor will be strictly scrutinized and penalized. Southeast Asian companies cooperating with Chinese firms and using raw materials or semi-finished products from regions like Xinjiang must fully prove their supply chain’s cleanliness. Otherwise, it will affect their exports to the US and potentially damage their global brand image.
To address these challenges, Southeast Asian countries should enhance supply chain audits and transparency, improve compliance training and standards, and diversify their supply chains.