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Can Trade with the People’s Republic of China be an Engine of Growth for Developing Asia?

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  • Park, Donghyun

    (Asian Development Bank)

  • Shin, Kwanho

    (Korea University)

Abstract

The recession in the United States in the wake of the global financial crisis has had a pronounced negative impact on developing Asia’s exports and growth. As a result, developing Asian countries are increasingly looking to the People’s Republic of China (PRC) as a new source of demand and growth. The central objective of this paper is to empirically assess whether trade with the PRC can become an engine of growth for developing Asia. To do so, we examine the structure of PRC’s trade with developing Asia, in particular the relative shares of parts and components versus final goods in its imports from the region. Our most significant result is that the share of final goods in the PRC’s imports from East and Southeast Asia has been rising while the share of parts and components has been falling, suggesting that the PRC is becoming more of a consumer and less of an assembler. This provides ground for optimism about the prospects of trade with the PRC as a source of resilience against extra-regional demand shocks in the short run and an additional source of growth in the long run.

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Bibliographic Info

Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 172.

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Length: 37 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:ris:adbewp:0172

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Keywords: China; Asia; engine; recovery; growth; trade; production fragmentation;

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References

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  1. Marcus Noland, 1995. "China and the International Economic System," Working Paper Series WP95-6, Peterson Institute for International Economics.
  2. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2002. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," Working Papers 486, Research Seminar in International Economics, University of Michigan.
  3. Athukorala, Prema-chandra & Kohpaiboon, Archanun, 2009. "Intra-Regional Trade in East Asia: The Decoupling Fallacy, Crisis, and Policy Challenges," ADBI Working Papers 177, Asian Development Bank Institute.
  4. Jane T. Haltmaier & Shaghil Ahmed & Brahima Coulibaly & Ross Knippenberg & Sylvain Leduc & Mario Marazzi & Beth Anne Wilson, 2007. "The role of China in Asia: engine, conduit, or steamroller?," International Finance Discussion Papers 904, Board of Governors of the Federal Reserve System (U.S.).
  5. Prema-chandra Athukorala, 2005. "Product Fragmentation and Trade Patterns in East Asia," Asian Economic Papers, MIT Press, vol. 4(3), pages 1-27, October.
  6. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
  7. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
  8. Greenaway, David & Mahabir, Aruneema & Milner, Chris, 2008. "Has China displaced other Asian countries' exports?," China Economic Review, Elsevier, vol. 19(2), pages 152-169, June.
  9. Pula, Gabor & Peltonen, Tuomas A., 2009. "Has emerging Asia decoupled? An analysis of production and trade linkages using the Asian international input-output table," Working Paper Series 0993, European Central Bank.
  10. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2007. "China and the Exports of Other Asian Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(2), pages 201-226, July.
  11. Borrus, Michael, 1997. "Left for Dead: Asian Production Networks and the Revival of US Electronics," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt2db8s8x6, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
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Cited by:
  1. 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.
  2. Park, Donghyun & Shin, Kwanho, 2009. "The People’s Republic of China as an Engine of Growth for Developing Asia? Evidence from Vector Autoregression Models," ADB Economics Working Paper Series 175, Asian Development Bank.
  3. Prema-chandra Athukorala & Nobuaki Yamashita, 2005. "Production Fragmentation and Trade Integration: East Asia in a Global Context," Departmental Working Papers 2005-07, The Australian National University, Arndt-Corden Department of Economics.
  4. Jesus Felipe, 2010. "Asia and the Global Crisis: Recovery Prospects and the Future," Economics Working Paper Archive wp_619, Levy Economics Institute.
  5. Dierk Herzer & Peter Nunnenkamp, 2011. "FDI and Income Inequality: Evidence from Europe," Kiel Working Papers 1675, Kiel Institute for the World Economy.

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