The writer is CEO of AsiaBIZ Strategy, a Singapore-based consultancy that provides Asian market research and investment/trade promotion services

The Asian Development Bank has forecast Asia to experience a steady 4.9% growth in 2025, with inflation cooling to 3%. This stable growth is driven by two main drivers: high tech and local demand. 

High-income and high-tech manufacturing exporters such as Taiwan, South Korea, Hong Kong and Singapore benefit from surging global demand for semiconductors, electronics and artificial intelligence applications. Meanwhile domestic consumption is driving growth for the rest of Asia. The large populations of countries like China, India and the so-called Asean-4 (Philippines, Indonesia, Malaysia and Thailand) create large local markets that support spending on services. Transport is also a growing source of exports across the region, including electric vehicles (EVs), as well as passenger and cargo ships.

How do these trends sit against the region’s foreign direct investment (FDI) backdrop? By various measures, its biggest economies have chequered FDI records of late. Unctad data shows that China’s inward FDI fell 14% in 2023, with more than one-third of the greenfield investment going into manufacturing. This drop is attributed to higher geopolitical risk, policy uncertainty and worsening growth prospects. Meanwhile government data shows that India’s inward FDI was $71bn in the last financial year, down 16% from the record high two years prior. The biggest sector recipients over the past year have been services such as finance and outsourcing, research & development, IT, telecommunications and automobile.

Southeast Asia will continue to be the biggest magnet for inward FDI. In 2023, the nine-country bloc [which one? or does he mean SE Asia as a region?] pulled in 39% of Asia’s FDI projects and 43% of announced capital expenditure, according to fDi Markets. This is driven in large part by the diversification of the global and Asia supply networks, including via China+1 and friendshoring strategies. Strong local reforms, an improving macroeconomic environment and strong prospects of the region’s new-economy sectors such as EVs and data centres also help. 

The biggest sources of Asian FDI continue to come from within the region itself — driven by China and Japan — with the UK and Germany also being big players. However the biggest source country of the region’s FDI continues to be the US. It means that the big inhibitor to FDI’s contribution to Asian growth next year — and beyond — is Donald Trump’s re-election. As I wrote ahead of the presidential race, a second Trump presidency will mean a dark, hawkish stance on Asia.