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Flying geese or sitting ducks: China’s impact on the trading fortunes of other Asian economies

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Author Info

  • Alan G. Ahearne
  • John G. Fernald
  • Prakash Loungani
  • John W. Schindler

Abstract

This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China’s dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 887.

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Date of creation: 2006
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Handle: RePEc:fip:fedgif:887

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Keywords: Economic development - China ; International trade ; Foreign exchange rates - China;

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References

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  1. Carolan, Terrie & Singh, Nirvikar & Talati, Cyrus, 1998. "The composition of U.S.-East Asia trade and changing comparative advantage," Journal of Development Economics, Elsevier, vol. 57(2), pages 361-389.
  2. Mico Loretan, 2005. "Indexes of the foreign exchange value of the dollar," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Win, pages 1-8.
  3. Anuradha Dayal-Gulati & Valerie Cerra, 1999. "China's Trade Flows," IMF Working Papers 99/1, International Monetary Fund.
  4. Alan G. Ahearne & John G. Fernald & Prakash Loungani & John W. Schindler, 2003. "China and emerging Asia: comrades or competitors?," International Finance Discussion Papers 789, Board of Governors of the Federal Reserve System (U.S.).
  5. C. H. Kwan, 2002. "The Rise of China and Asia's Flying-Geese Pattern of Economic Development: An Empirical Analysis Based on US Import Statistics," Discussion papers 02009, Research Institute of Economy, Trade and Industry (RIETI).
  6. Diwan, Ishac & Hoekman, Bernard, 1999. "Competition, Complementarity and Contagion in East Asia," CEPR Discussion Papers 2112, C.E.P.R. Discussion Papers.
  7. Abeysinghe, Tilak & Lu, Ding, 2003. "China as an economic powerhouse: Implications on its neighbors," China Economic Review, Elsevier, vol. 14(2), pages 164-185.
  8. John Fernald & Hali Edison & Prakash Loungani, 1998. "Was China the first domino? assessing links between China and the rest of emerging Asia," International Finance Discussion Papers 604, Board of Governors of the Federal Reserve System (U.S.).
  9. John Fernald & Prakash Loungani, 2004. "Comrades or competitors? on trade relationships between China and emerging Asia," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
  10. Harm Zebregs, 2004. "Intraregional Trade in Emerging Asia," IMF Policy Discussion Papers 04/1, International Monetary Fund.
  11. Maria Socorro Gochoco-Bautista, 1995. "ASEAN-China Economic Relations into the 21st Century," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 32(2), pages 159-170, December.
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Citations

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Cited by:
  1. Zhou, Bin & Cling, Jean-Pierre & Chaponnière, Jean-Raphael, 2010. "Vietnam Following in China’s Footsteps : The Third Wave of Emerging Asian Economies," Economics Papers from University Paris Dauphine 123456789/10802, Paris Dauphine University.
  2. Kumakura, Masanaga & Kuroko, Masato, 2007. "China's Impact on the Exports of Other Asian Countries: A Note," IDE Discussion Papers 131, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  3. Alicia García-Herrero & Tuuli Koivu, 2009. "China's exchange rate policy and Asian trade," BIS Working Papers 282, Bank for International Settlements.
  4. Shanping Yang & Inmaculada Martínez-Zarzoso, 2013. "A Panel Data Analysis of Trade Creation and Trade Diversion Effects: The case of ASEAN-China Free Trade Area (ACFTA)," Ibero America Institute for Econ. Research (IAI) Discussion Papers 224, Ibero-America Institute for Economic Research.
  5. Carolan, Terrie & Mora, Jesse & Singh, Nirvikar, 2012. "Trade Dynamics in the East Asian Miracle: A Time Series Analysis of U.S.-East Asia Commodity Trade, 1962-1992," MPRA Paper 37124, University Library of Munich, Germany.
  6. Yiping Huang & Bijun Wang, 2011. "From the Asian Miracle to an Asian Century? Economic Transformation in the 2000s and Prospects for the 2010s," RBA Annual Conference Volume, in: Hugo Gerard & Jonathan Kearns (ed.), The Australian Economy in the 2000s Reserve Bank of Australia.
  7. repec:ebl:ecbull:v:6:y:2008:i:5:p:1-15 is not listed on IDEAS
  8. Freund, Caroline & Pierola, Martha Denisse, 2008. "Export surges : the oower of a competitive currency," Policy Research Working Paper Series 4750, The World Bank.

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