Asia’s economic miracle was built on trade. For decades, export-led growth lifted hundreds of millions out of poverty, created vast manufacturing workforces, and offered young people a reliable ladder into the middle class. That model is now under severe strain — and the costs are falling disproportionately on the continent’s Generation Z.
Across Asia, a double shock is hitting economies that once thrived on globalisation. On one side is a flood of low-cost Chinese exports as Beijing doubles down on manufacturing to sustain growth at home. On the other is the renewed trade war launched by United States President Donald Trump, which has disrupted supply chains and narrowed access to Western markets. Together, they are squeezing job creation, depressing wages and eroding the economic promise that underpinned social stability for a generation.
For young Asians, the timing could hardly be worse. Many are already struggling with stagnant pay, soaring housing costs and growing student debt. The factory jobs that powered their parents’ rise are becoming scarcer, while competition for white-collar work has intensified as universities churn out record numbers of graduates. The result is a generation facing fewer opportunities and greater insecurity than those who came before.
At the centre of the disruption is China’s evolving economic model. With domestic demand weak and its once-booming property sector still a drag, Beijing has leaned heavily on manufacturing to keep growth afloat. State-backed firms have ramped up production, supported by subsidies, cheap credit and an assertive industrial policy. The outcome is an annual trade surplus now exceeding US$1 trillion, even as shipments to the United States decline sharply under tariffs and political pressure.
Those exports are increasingly being diverted to neighbouring economies. From Southeast Asia to South Asia and parts of the Global South, Chinese goods are swamping local markets, undercutting domestic producers and stirring resentment. French President Emmanuel Macron has warned that the European Union may take strong countermeasures if Beijing fails to address what he calls a dangerous imbalance. But it is Asia — geographically closest and economically intertwined with China — that is absorbing the greatest shock.
The Association of Southeast Asian Nations (ASEAN) is particularly exposed. Many of its members built their development strategies on low-cost manufacturing similar to China’s own rise two decades ago. Today, they are struggling to compete with the sheer scale, efficiency and state support behind Chinese output. Import curbs and safeguard measures have slowed but not stopped the inflow.
The pain is most acute in labour-intensive industries that traditionally employed young workers with limited formal education. In Indonesia, around 60 textile factories have shut since 2022, according to a recent report by the Lowy Institute, a Sydney-based think tank. An estimated 250,000 jobs have already been lost. Industry groups warn that another half-million could disappear in 2025, potentially wiping out one in four jobs in the sector within just a few years.
Indonesia, Southeast Asia’s largest economy with a population exceeding 280 million, is far from alone. Thailand recorded roughly 2,000 factory closures last year, with officials citing cheap Chinese imports as a major factor. Cambodia, Bangladesh and Sri Lanka have also seen pressure build in garments, footwear and light manufacturing — sectors that have long served as entry points for young people entering the workforce.
What makes the current wave especially troubling is that it extends beyond low-end production. The US-China Economic and Security Review Commission warns that China’s overcapacity is now reshaping markets across advanced industries, including electric vehicles, batteries, pharmaceuticals and robotics. These are precisely the sectors Asian governments had hoped would anchor future growth and provide higher-quality jobs for educated youth.
Economists David Autor and Gordon Hanson argue that this new phase — dubbed “China Shock 2.0” — could prove even more disruptive than the first China shock that reshaped the global economy between 1999 and 2007. That earlier period contributed to the loss of nearly a quarter of US manufacturing jobs and left deep political scars. This time, the impact is likely to be broader and faster, hitting emerging economies with fewer safety nets.
The political consequences are already becoming visible. Across parts of Asia, younger voters are angrier, more sceptical of elites and less trusting of traditional institutions. China’s export surge is not the sole cause, but it is intensifying existing frustrations over corruption, inequality and limited economic mobility.
That anger spilled onto the streets this year in Indonesia, Timor-Leste and the Philippines, where youth-led protests denounced nepotism, rising prices and the lack of decent jobs. In Nepal, widespread outrage over graft and economic stagnation culminated in the collapse of the government in early September, driven in large part by young protesters who see little future in the current system.
Beijing is not blind to the risks. Chinese leaders are aware that destabilising neighbouring economies could undermine regional goodwill at a time when Washington’s tariffs are already straining ties. Recent official statements have made veiled references to global uncertainty, calling for “better coordination between domestic economic work and an international economic and trade battle”. The Communist Party leadership has pledged to “act without delay” to develop new growth engines and manage external frictions.
There are, undeniably, some bright spots. Exports from Southeast Asia to the United States rose about 23 per cent year-on-year in September, with Vietnam and Thailand leading the gains, according to Lowy Institute data. Much of that growth reflects multinational companies diversifying production away from China because of geopolitical risk and tariffs.
Yet that shift is not automatically translating into secure or plentiful jobs for young workers. Many new investments are capital-intensive, rely heavily on automation, or are concentrated in special economic zones that employ fewer people than traditional factories. Wage growth remains modest, and job security is often weak.
Simply blocking Chinese imports is unlikely to offer a lasting solution. Chinese components and machinery are deeply embedded in regional supply chains, and protectionist measures risk raising costs for local firms and consumers alike. Fragmented national responses also leave smaller economies vulnerable to retaliation or circumvention.
More credible strategies would focus on helping domestic companies move up the value chain, access new export markets and boost productivity. Coordinated regional trade defences, rather than unilateral actions, could help manage surges more effectively. Just as crucial is investing in retraining, income support and active labour market policies to help displaced young workers transition into new roles.
Without such measures, economic frustration among Asia’s Gen Z risks hardening into lasting political volatility. A generation that feels locked out of prosperity is less likely to support open trade, regional integration or democratic compromise.
China’s new economic model may be stabilising growth at home. But by exporting overcapacity and uncertainty, it is reshaping labour markets across Asia — and testing the social contracts that underpin them. For millions of young people, no amount of cheap goods can compensate for the loss of opportunity.
