Table Of ContentCHINA–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
