Even before the lifting of the veil on China’s ongoing multi-year cyclical slowdown that began in 2010 — let alone the far more serious structural downdraft Beijing only recently began to acknowledge is underway, albeit labelling it as a “transition” — companies and investors started to wake up to the reality other countries in East Asia are very attractive destinations.

Perhaps, in some cases, even an alternative to China.

If anything, that interest has been growing steadily, with much of the attention centred on the Association of South East Asian Nations (Asean), which dates back to 1967 and currently consists of ten countries: Cambodia, Laos, Malaysia, Singapore, Brunei, Myanmar, Indonesia, the Philippines, Thailand and Vietnam. It has intensified recently with the formal establishment of the Asean Economic Community in November 2015, which seeks to create an integrated market that would comprise about 50 per cent of China’s population and whose total annual inflows of foreign direct investment overtook China’s in 2013.

In many respects, Asean’s economic firepower comes from the five Southeast Asian ‘tigers’ — Indonesia, Malaysia, the Philippines, Thailand, and Vietnam (sometimes labelled the ‘Asean-5’). They constitute much of the set of countries that in the latter half of the 20th century was dubbed by the World Bank as the “East Asian Miracle”.

While they were ‘ground zero’ for the highly contagious 1998 global currency crisis, once again they are the stars among emerging markets, if not the global economy. Indeed, as the roars of these tigers get more and more powerful, they are increasingly considered by business to be part of a ‘China 2.0’ play.

The rejuvenation, if not the blossoming, of the Asean-5 — where average GDP growth in real terms from 2012 to 2015 was 6.3 per cent, higher than the average growth rate of 5.8 per cent for all emerging markets — did not come overnight. The seeds were sowed for decades — even before the 1998 crisis, which, while upending certain swaths of many of the economies in Asean, did not do as much damage as was feared to the underlying cultural and socioeconomic fabric that engenders these countries’ entrepreneurship and robust work ethic.

In addition, in many respects the post-1998 reforms have made substantial improvements to the status quo ante economic environment. If the Trans-Pacific Partnership comes to pass, two of the Asean-5 — Malaysia and Vietnam, which are TPP members — should get a direct boost, and the three others, if not Asean overall, will likely indirectly benefit.

To be sure, the Asean region — like most emerging markets — is still beset by challenges, shaped by deep, long-standing complexities. Corruption and cronyism, for example, are ever-present throughout much of the region, just as it is in China, while in the latter case it is far more concealed — although the veil on that is also being lifted little by little.

There is of course heterogeneity in economic performance among the Asean-5. To wit, while Indonesia, Malaysia, the Philippines and Vietnam registered strong growth over the past few years, Thailand has been in the midst of political turmoil and those troubles have permeated its economy, leading to a sharp slowdown — although a good recovery is now underway.

At present, the IMF forecasts that in 2016 the increase in average GDP for the Asean-5 will continue to exceed that of all emerging markets: 4.8 per cent versus 4.3 per cent.

It should not come as a surprise that it is the substantial erosion of China’s economy — where growth has fallen from 10.6 per cent in 2010 to 6.8 per cent in 2015, and forecast to grow at 6.3 per cent in 2016 — that is largely responsible for downshift in overall growth in the Asean region, not to mention across emerging markets as a group.

Although much of world breaks out paper tissues when China sneezes, it’s the countries in the immediate neighbourhood that need to keep their cotton handkerchiefs handy. Needless to say, China will likely continue to play a substantial role in the economic fortunes — whether positive or negative — of the Asean-5, as well as the broader Southeast Asian region, at least in the short- to medium-run.

About 550 million people live in the Asean-5, which is 40 per cent of China’s population. From a global economic perspective this is a sizeable market any way you cut it. Moreover, these countries are home to a large and expanding pool of highly-skilled, literate and low-cost workers.

This is the direct outgrowth of increasingly larger flows of domestic and foreign capital investment, much of which in most of the region, in contrast to China, has been increasingly sourced from the private sector.

In fact, in recent years the Asean-5’s labour force has been growing twice as fast as China’s. No puzzlement here: China’s 35-year-old ‘one-child policy’, which was relaxed to a ‘two-child policy’ only at the close of 2015, has been a ball and chain on the country’s ability to replenish its working age population.

Hence, the premature ‘greying’ of China. This is perhaps the most critical competitive advantage of Southeast Asia over China, and fleet-footed world-class companies have begun to take note.

At the same time, the region has been experiencing an explosive growth of a ‘consumer class’. This is not unlike other emerging markets, including, of course, China. But when combined with the rise of high-skilled workers, this makes for an increasingly sophisticated and more discerning set of customers — something fast-growing businesses eager to capitalise on higher value-added goods and services covet.

Not only are labour costs in Southeast Asia significantly lower than those in North America or Western Europe, but they are also generally quite competitive with China. The average monthly wage rate in China is more than $600, whereas among the Asean-5, Thailand’s monthly wage of about $400 is the highest and Indonesia’s of approximately $200 is the lowest.

Indeed, it is the competitiveness of the cost of labour — coupled with policies that facilitate industrial clustering — that is prodding multinationals to use Southeast Asia as a both a regional and a global hub for network investment, production, and trade, including in competition with China.

This is perhaps epitomised by Thailand’s long-standing positioning of itself as an auto production, assembly, component maker, and finished product manufacturer hub for Southeast Asia and parts of the globe beyond.

Moreover, the Asean-5 has all experienced steady improvements in the proportion of adults who are literate: at present their average literacy rate is above 95 per cent, with the highest — Thailand — having a literacy rate that exceeds China’s. In addition, English is either an official language or favoured as a secondary language in the Philippines, Malaysia, Thailand, and Vietnam.

Education First’s “English Proficiency Index”, based on actual recorded scores of in-country administered tests, indicates that all of the Asean-5 except Thailand have considerably higher test scores than China.

This is pertinent because it has been creating significant opportunities for the offshoring and outsourcing of services — the fastest growing portion of world trade flows and the key to any country’s prospective international competitiveness in the 21st century. Investments in the last decade have positioned the Philippines, with its pool of highly literate, English-speaking, low-cost workers, to provide services across the value chain, including back office support, call centre services, engineering design, and software development.

The service sector growth opportunities have also created complementary growth opportunities in other enabling industries such as hardware, software, networking, security, and related providers. It goes without saying that with only a few exceptions, China has limited comparative advantage in this sphere and is unlikely to develop it on a globally saleable basis anytime soon.

But surely it must be the case in the short-run China can still hold sway over its Asean neighbours in the manufacturing sector? Regrettably — for China — that is becoming less and less the case.

Rising production costs in China in fact have been driving the momentum of manufacturing and production location decisions toward Asean countries.

As one might expect, this is particularly true in low-cost production venues, especially for labour-intensive manufacturing. Vietnam has surpassed China to become the largest production venue for Nike, while Coach, citing rising labour costs, has been shifting a substantial portion of its production activities from China to neighbouring Asean countries.

Japan’s direct investment flows into the Asean countries has also been rising; so much so that they now account for about 16 per cent of all of Japanese overseas direct investment worldwide. This is more than twice as large as the share of Japan’s global foreign direct investment currently flowing into China.

Yet from the standpoint of future economic attractiveness and the ability of the Asean-5 countries to indeed become a significant counterweight to China, perhaps even an alternative destination for inbound foreign investment by companies, private equity firms and other direct investors, more telling is the disposition of such investment today.

It is well-known that in recent years China generally has been the largest recipient of annual foreign direct investment inflows on a global basis. But focusing on yearly investment flows can be misleading, since there is generally variation — sometimes very significant variation — in such amounts from year to year.

The economically meaningful measure is the cumulative flow or the stock of investment over a number of years. Equally important is to not conflate absolute with relative measurements.

This is particularly distortionary when the overall size of China dwarfs other economies, whether taken individually or collectively.

Through this prism, the picture that emerges is striking: as of 2014, whereas the stock of foreign direct investment in China as a share of GDP is about 11 per cent, for the Asean-5 it was 38 per cent — a threefold difference.

These data speak for themselves as to the confidence investors have in the prospects of the Asean countries in comparison to China.

How integrated are the Asean countries as an economic space compared to China is similarly critically important in judging their respective competitive prospects for investment in the years to come. To this end, from 2000-14, intra-regional investment within the Asean countries grew 28 per cent, as opposed to investments into Asean from outside the region, which increased at 12 per cent.

In contrast, one might surmise that since China is one country — an exceedingly large one, to state the obvious — an integrated market already exists therein. Unfortunately, China is actually economically characterised (as it has been for years) as a composite of provinces that do not open themselves up to anything close to a nationwide network that engenders free cross-border trade and investment.

To the contrary, there exist significant inter-provincial barriers to trade and investment within China. Until this changes — and the prospects for such do not seem to be in offing anytime soon — China will have a hard time presenting itself as a bona fide integrated economic space.

If anything, this will continue to undercut its competitiveness with the Asean countries.

The writer is currently a faculty member at Johns Hopkins University and CEO and Managing Partner of Proa Global Partners LLC, a business strategy consultancy focused on emerging markets.