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Spatial Panel Analysis On Asean–China Trade Links

Author

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  • CHEN-CHEN YONG

    (Department of Economics, Faculty of Economics and Administration, University of Malaya, 50603 Kuala Lumpur, Malaysia)

  • SIEW-YONG YEW

    (Department of Economics, Faculty of Economics and Administration, University of Malaya, 50603 Kuala Lumpur, Malaysia)

  • MUI-YIN CHIN

    (Economics and Corporate Administration Department, Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University College, Jalan Genting Kelang, 53300 Setapak Kuala Lumpur, Malaysia)

Abstract

The change of trade structures from the dynamic development of production networks globally had caused processing trade to become more prominent in China. This change drives ASEAN5 to be more aggressive in developing vertical intra-industry trade (VIIT) with China. This study aims to identify the catalysts that strengthened the VIIT relationship between ASEAN5 and China for manufacturing sub-sectors. Both decomposition-type threshold method and spatial panel econometric modelling are used and the results show that foreign direct investment (FDI) and difference in gross domestic products (DGDP) are the influential determinants of VIIT although their impacts vary across manufacturing sub-sectors. The results also confirm the presence of spatial interaction effects among ASEAN5 countries in relation to China’s trade. These suggest that deeper economic integration among ASEAN5 countries is vital in strengthening bilateral VIIT with China. Moreover, to foster the value chain between the two regions, emphasis on performing similar tasks with differentiated varieties of products is essential as the two regions have similar comparative advantages.

Suggested Citation

  • Chen-Chen Yong & Siew-Yong Yew & Mui-Yin Chin, 2019. "Spatial Panel Analysis On Asean–China Trade Links," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(03), pages 709-726, June.
    • Handle: RePEc:wsi:serxxx:v:64:y:2019:i:03:n:s0217590816500272
    DOI: 10.1142/S0217590816500272
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    1. Amadeo Navarro Zapata & María Arrazola & José Hevia, 2023. "Technological intensity in manufacturing trade between ASEAN and the EU: challenges and opportunities," Asia Europe Journal, Springer, vol. 21(1), pages 23-42, March.

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