China-ASEAN Trade Relations : A Discussion on Complementarity and Competition PDF
Preview China-ASEAN Trade Relations : A Discussion on Complementarity and Competition
CHINA–ASEAN TRADE RELATIONS The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the many-faceted problems of stability and security, economic development, and political and social change. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. An Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute’s chief academic and administrative officer. 00 China-ASEAN TR Prelims 2 7/12/05, 12:01 PM CHINA–ASEAN TRADE RELATIONS A Discussion on Complementarity and Competition Chen Wen Liao Shaolian First published in Singapore in 2005 by ISEAS Publications Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: bookshop.iseas.edu.sg This book is published under the ASEAN-China Study Programme funded by Professor Saw Swee-Hock. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2005 Institute of Southeast Asian Studies, Singapore ISEAS Library Cataloguing-in-Publication Data Chen Wen. China-ASEAN trade relations : a discussion on complementarity and competition. 1. China—Commerce—Southeast Asia. 2. Southeast Asia—Commerce—China. 3. Free trade—China. 4. Free trade—Southeast Asia. I. Title. II. Liao, Shaolian. HF3790.8 Z7C5C51 2005 ISBN 981-230-364-2 Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Seng Lee Press Pte Ltd 00 China-ASEAN TR Prelims 4 7/12/05, 12:01 PM CONTENTS I Introduction 1 II Literature Review 3 III Bilateral Trade Relations between China and ASEAN 6 IV Competition in the Third Market 16 V Analysis of the Complementarity 35 VI Prospects of Trade Relations 42 Appendix 1 Commodity Structure of the Bilateral Trade between China and ASEAN-5 in 2003 (%) 44 Appendix 2 Composition of the Bilateral Trade between China and ASEAN-10 at SITC 1-Digit and 2-Digit Levels (2003) 46 Appendix 3 Intra-Industry Trade Indices and Contribution of the Bilateral Tade between China and ASEAN-5 at HS 2-Digit Level 50 Appendix 4 Revealed Comparative Advantage Index (RCA) of China and ASEAN-5 Countries (2001) 54 Notes 68 References 73 The Authors 77 00 China-ASEAN TR Prelims 5 7/12/05, 12:01 PM Introduction 1 I INTRODUCTION The trade relationship between China and ASEAN is deep-rooted on account of history, geography, and past migration in the region (see Wong 1984, 1987). But the trade relationship was full of twists and turns during the 1950s, 1960s and 1970s because of political and ideological reasons. With the normalization of bilateral diplomatic relations and China’s adoption of the opening up and reform policies, trade relations have since been growing steadily. The past two decades or so have also seen dramatic changes in trade commodities between China and the ASEAN countries. In November 2002, leaders of China and ASEAN members signed the “Framework Agreement on Comprehensive Economic Cooperation between ASEAN and China”, which provides the groundwork for the eventual establishment of the China–ASEAN Free Trade Area by 2010 for the older ASEAN members and 2015 for the newer members. In January 2004, the “Early Harvest” for some agricultural products came into force. The bilateral trade relationship between China and ASEAN improved substantially during the last two years. Considering China’s strong economic growth and its increasing role in the world economy, ASEAN countries are more cautious about China’s presence. In order to promote mutual understanding, to continuously search for new fields and ways for cooperation, and to find possible approaches to attaining a propitious outcome of the competition, and ways to ameliorate adverse effects of the rivalry, it is essential to conduct 01 China-ASEAN TR 1 7/12/05, 12:02 PM 2 China-ASEAN Trade Relations in-depth study of the trade relations between China and ASEAN, which will have a great impact on the overall China–ASEAN relationship in the future. This work will first offer a literature review on China–ASEAN trade relations and then describe the development process of bilateral trade relations between China and ASEAN. The focus of the research will be on the analysis of trade competition and complementarity respectively. The prospects for trade relations between China and ASEAN are discussed at the end of the study. 01 China-ASEAN TR 2 7/12/05, 12:02 PM Literature Review 3 II LITERATURE REVIEW Due to China’s ongoing opening up and reform policies and its intention of stepping up its industrialization programmes, the ASEAN countries began to pay more attention to their economic relations with China, among which trade relations became the focus of attention. As early as 1984, John Wong published The Political Economy of China’s Changing Relations with Southeast Asia. In the second half of the 1980s, a three-year research project on “ASEAN–China Economic Relations” was jointly conducted by the Institute of Southeast Asian Studies in Singapore and the Institute of World Economy and Politics of the Chinese Academy of Social Sciences in China. As an outcome of the project, three books were published. The earlier studies found that China and ASEAN were not major trading partners with each other, with very limited shares of bilateral trade in their total trade. Primary goods such as traditional foodstuffs and light manufactures (various kinds of household utensils and tools, garments and textiles) were their major export commodities. But people began paying attention to the potential export competition between China and ASEAN. ASEAN was facing the challenge of a rapidly industrializing China, which not only exported in large quantities its low-priced manufactured products1 to the ASEAN market, but also competed indirectly in third-country markets, which was regarded as a more serious threat to ASEAN (Wong 1984 and 1987). China would likely be considered as a direct competitor for 02 China-ASEAN TR 3 7/12/05, 12:02 PM 4 China-ASEAN Trade Relations manufactured exports in the major developed countries, that is, the United States, Japan and European markets. Regarding the export competition between China and ASEAN, some surveys have been made from different perspectives. For example, Herschede (1991) studied the changing pattern of export competition between China and ASEAN2 for products at the SITC 1-digit level with a focus on the Japanese market over the period 1982–87, while Voon (1998) studied the degree of export rivalry and competition between China and individual ASEAN countries in four product groups3 in the U.S. market during the periods 1982–86 and 1990–94. Because ASEAN is by no means a homogeneous grouping, Chang, et al. (1997) examined the export competition between China and each of the ASEAN-54 in the U.S. and European markets during 1980–94. Some scholars found that “Thailand no longer enjoys a competitive edge in exports over China (at least in the U.S. market)” and “China has lagged behind Malaysia in export performance by a big margin”.5 Unlike others, Tyers et al. (1987) only focused on LIM6 export competition between China and each of the ASEAN-5 and examined the respective patterns of comparative advantage. They found that “the considerable expansion of the ASEAN share of U.S. imports was substantially outpaced by China”7 and that “education and work-force skills will be decisive factors in future developments, and the most important ASEAN exports are likely to be manufactures and services that are relatively intensive in human capital and technology rather than labor-intensive”.8 As regards the complementarity between China and ASEAN, most studies only touch upon this issue when they pinpoint the competition, such as Chia and Cheng (1987), Wong and Chan (2003), and Chen (2003a). However, Noor and Pier (1997), Palanca 02 China-ASEAN TR 4 7/12/05, 12:02 PM Literature Review 5 (1999) employed revealed comparative advantage index to analyse the complementarity. A general conclusion of the studies mentioned above is that the trade relationship between China and ASEAN is “dynamic”, with competition in a third market than complementarity in a mutual market or the world market. With the intention of pushing ahead into the territory of higher technology and capital-intensive industries and deeper integration into the world economy, there is great concern in ASEAN about the likelihood of encountering trade competition from China, not only in traditional commodities but also non-traditional manufactured goods. As most of the studies mentioned above analysed the trade relations by 1995, it is important to update the studies on trade relations between China and ASEAN, especially since great changes in China and ASEAN trade patterns have taken place during the past decade. 02 China-ASEAN TR 5 7/12/05, 12:02 PM
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