Every export increasingly carries two products: the good itself and the evidence that makes it admissible. The cost of producing the second may determine who can sell the first.
This is an overlooked consequence of selective US–China decoupling. Production costs still matter, but they are no longer the only price of market access. Firms increasingly need to prove where goods originated, which inputs they contain, whether suppliers are exposed to sanctions or other restrictions, how much carbon production generated, and which technologies handled sensitive data. As supply chains become more fragmented, the ability to manufacture competitively is becoming inseparable from the ability to prove what happened along the way.
That matters especially now. A recent Modern Diplomacy report showed that some companies that shifted production out of China are restoring suppliers or orders there after encountering higher costs, shortages of skilled labor and equipment, infrastructure constraints, and fragmented supplier networks. Some are retaining capacity elsewhere as a hedge rather than treating it as a full replacement for China. Modern Diplomacy’s report on manufacturing returning to China At almost the same time, President Xi Jinping used the BRICS summit in New Delhi to call for cooperation on “AI-empowered new industrialization” and deeper industrial and supply-chain collaboration. China is therefore not only defending its manufacturing density; it is also trying to shape the next generation of industrial capacity.
ASEAN is unusually well placed in this reordering. Its members combine strategic flexibility, major manufacturing clusters, critical minerals, energy resources, financial hubs, and deep economic ties with China, the United States, Japan, South Korea, and Europe. Yet geography and diversification alone will not determine who benefits. The durable winners will be those able to manufacture competitively, produce evidence that multiple markets trust, and change suppliers or routes without breaking the chain of proof.
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Rerouting is not separation
The current restructuring is better understood as rerouting than clean separation. A 2026 Peterson Institute analysis found that China’s share of direct US imports fell by seven percentage points between 2017 and 2024, while the Chinese value-added share embedded in total US imports declined by only two points. Taiwan, Vietnam, and Mexico gained market share, but much of the underlying production system remained interconnected. Peterson Institute analysis on the limits of US–China decoupling
This is why moving final assembly does not necessarily move dependency. Chinese inputs may travel through factories elsewhere before reaching American customers, while firms increasingly distribute production across several countries rather than choosing one geopolitical ecosystem exclusively. The result is a multiplex digital ecosystem: a Southeast Asian factory may use Chinese robots, Japanese machinery, American cloud services, European standards, and Singaporean financing, while its inputs, software, capital, and data remain spread across several jurisdictions.
The more complex this arrangement becomes, the more valuable credible evidence becomes. An exporter must be able to show what happened at each stage in a form that customs authorities, buyers, sustainability regulators, and sanctions supervisors can accept. Competitive production without credible documentation can still end in exclusion from the market.
When compliance becomes a market-access barrier
Singapore offers an early glimpse of this future. Its Customs Circular No. 06/2025 stresses accurate origin declarations for imports, exports, and transshipments, defining origin around where goods were wholly obtained or substantially transformed. Repacking, relabeling, or simple assembly are not enough to establish a different economic origin, while firms may need manufacturing records, process documentation, invoices, and supplier declarations to demonstrate what actually happened.
The strategic implication extends beyond customs procedure. Changing a shipping label or final assembly point does not erase a product’s history. As governments expand export controls, forced-labor restrictions, carbon disclosure, and technology-security requirements, buyers increasingly need evidence rather than assurances.
These demands naturally favor firms with enterprise software, auditors, specialized legal teams, carbon-accounting systems, and enough bargaining power to extract information from suppliers. Smaller firms and developing economies may face similar evidentiary requirements without comparable resources. This creates a double asymmetry: external compliance demands rise faster than institutional capacity, while capability gaps inside ASEAN widen between sophisticated multinational networks and local suppliers trying to enter them.
The cost of proof can therefore become a market-access barrier of its own.
Beyond the smart factory
A smart factory is only one node in a production system that begins with financing and raw materials and continues through components, equipment, software, assembly, logistics, customs, and the final market. A genuinely smart supply chain is not defined by automation alone but by whether the system remains legible and adaptable as these layers interact.
That requires firms to trace important materials and technologies, produce records that regulators and buyers trust, separate sensitive data or production where rules conflict, and reconfigure suppliers or software without paralysing the network. Smart manufacturing without this wider governance architecture can simply reproduce a more technologically sophisticated form of dependency.
The same applies inside the factory. If one vendor controls the operating system, industrial cloud, sensors, maintenance data, and upgrades, switching may become prohibitively expensive. Traceability can improve trust, but technological dependence can also create vulnerability. Cybersecurity, data sovereignty, and vendor lock-in therefore belong inside supply chain strategy rather than being treated as technical afterthoughts.
ASEAN’s middle way must become operational.
ASEAN has long defended strategic flexibility rather than binary alignment. But as geopolitical competition moves deeper into technology, industrial policy, and standards, diplomatic flexibility increasingly needs an operational equivalent inside production systems.
Operational neutrality does not mean removing Chinese or American technology. It means combining partners without becoming captive to one technological or regulatory ecosystem. ASEAN manufacturers should be able to use Chinese robotics, American digital services, Japanese and South Korean machinery, European standards, and regional finance while preserving auditable alternatives when market rules diverge.
The strategic prize is not neutrality for its own sake, but credible optionality. Strategic autonomy does not require self-sufficiency; it requires the ability to remain connected without becoming trapped. Countries that can demonstrate the integrity of their inputs, processes, and digital systems can negotiate with more partners and adapt faster when tariffs, sanctions, or buyer requirements change.
Why the regional layer matters
No ASEAN member possesses the entire chain. Indonesia combines critical minerals, energy, and a large domestic market. Malaysia has deep electronics and semiconductor capabilities. Singapore contributes finance, logistics, and certification; Thailand has established automotive clusters; and Vietnam has become an important manufacturing and assembly base. Individually they are production nodes; together they can offer something closer to a resilient regional system.
The ASEAN Investment Report 2025 highlights increasingly dense cross-industry linkages among semiconductors, electronics, automotive production, and electric vehicles. Semiconductor output feeds both electronics and automobiles, while EV expansion increases demand for chips and electrical components. ASEAN Investment Report 2025: ASEAN itself describes semiconductors and automotive among the region’s high-value supply-chain-intensive industries.
Electronics and EVs therefore provide a visible test case for regional cooperation. Compared with primary commodity exports, these relatively technology-intensive industrial chains contain more layers of components, engineering, software, certification, and supplier relationships, while also facing questions of component origin, critical minerals, carbon, safety, and technology provenance. A credible regional proof architecture could therefore create value beyond administrative efficiency by helping ASEAN retain more sophisticated industrial activity as supply chains diversify.
An early pilot could link selected electronics and EV production corridors rather than attempting to digitize entire supply chains. The objective would be to test whether evidence created in one jurisdiction can be trusted and reused in another through common data definitions, compatible digital identities, mutual recognition of selected certificates, and secure cross-border verification. ASEAN does not need every member to build the same capabilities; it needs complementary capabilities to become interoperable.
From trade documents to a chain of proof
ASEAN is not starting from zero. The ASEAN Single Window already connects national systems for the electronic exchange of trade documents, and by June 2025 all member states were exchanging both the ATIGA e-Form D and the ASEAN Customs Declaration Document through the system. ASEAN is also developing its next-generation Single Window with greater interoperability and potential links to dialogue partners, including China, Japan, South Korea, and the United States. ASEAN Single Window
The harder next step is to extend this logic beyond documents presented at the border toward selected evidence generated throughout production. That does not require a giant regional database containing every supplier contract or proprietary dataset. Sensitive raw information can remain under corporate or national control while trusted credentials verify specific claims.
Digital signatures and verifiable credentials may be sufficient for many transactions, while permissioned blockchain could help where several parties need a shared audit trail. But technology cannot create truth: false information entered at the factory gate remains false even if it is permanently recorded. Questions about who can certify a claim, who can inspect it, what information remains private, and how conflicting interpretations are resolved are institutional questions before they are technical ones.
Build corridors of trust.
Progress need not wait for every ASEAN member to reach the same level of readiness. Coalitions of willing countries could begin with electronics and EV corridors, focusing on selected components, certificates, or production stages where duplicated compliance is costly and cross-border evidence already matters. If successful, the same logic could later expand into critical minerals, renewable-energy equipment, food, or other strategic sectors.
Regional verification could reduce repeated compliance costs, help smaller suppliers enter sophisticated production networks, and give ASEAN more leverage when negotiating standards, technology transfer, and investment conditions. For investors, this would offer something more valuable than a collection of alternative factory locations: a trusted production system.
China’s continuing manufacturing density shows why industrial ecosystems remain difficult to replicate. Yet the more production spreads across borders, the more another capability begins to matter: proving what happened inside those increasingly complex ecosystems.
ASEAN does not need to pretend China has disappeared from its supply chains in order to benefit from diversification. Its larger opportunity is to make interdependence manageable. The winners of US–China decoupling may not be those that move production fastest, but those that can make complex production networks trustworthy without making them captive.
For ASEAN, the question is no longer simply whether geopolitical disruption can attract factories. It is whether the region can build a chain of proof strong enough to turn that disruption into durable agency.
