An Analysis of the Evolving ASEAN-China Trade

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An Analysis of the Evolving
ASEAN-China Trade Linkages
K EVIN C . C HUA, PH.D.
RO NALD U. ME NDOZA, P H . D.
MONICA M. MELCHOR
SHANDONG UNIVERSITY
ASIAN INSTITUTE OF MANAGEMENT
ASIAN INSTITUTE OF MANAGEMENT
CENTER FOR ECONOMIC RESEARCH
POLICY CENTER
POLICY CENTER
KC H UA @ S DU.E DU.C N
[email protected]
[email protected]
Background and Motivation
ASEAN and China – strategic trade partners or competitors?
◦ Growing bilateral trade
◦ While simultaneously competing in the exports of major goods to similar trade destinations
Quick survey of literature
Scope of paper
◦ Reviews ASEAN-China trade statistics to assess the economic importance of China to ASEAN and viceversa.
◦ Explores whether the evolving trade relations are competitive or complementary
◦ Discusses the regional production chain to illustrate opportunities for ASEAN to promote mutual growth
with China
Data Inconsistencies across Sources
Database Comparison of ASEAN Trade with China (In US$ Billions)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
14.2
14.5
19.5
29.1
41.4
52.3
65.0
77.9
87.6
81.6
118.5
142.5
141.9
-
18.1
17.4
23.2
30.6
47.7
61.1
75.0
93.2
109.3
96.6
117.7
147.1
177.6
-
-3.9
-2.9
-3.7
-1.5
-6.4
-8.9
-9.9
-15.2
-21.7
-15.0
0.8
-4.6
-35.7
-
32.3
31.9
42.8
59.6
89.1
113.4
139.7
171.1
196.9
178.2
236.2
289.7
319.5
-
22.2
23.2
31.2
47.3
63.0
75.0
89.5
108.4
117.0
106.7
154.7
193.0
195.9
-
17.3
18.4
23.6
30.9
42.9
55.4
69.5
94.1
114.3
106.3
138.2
170.1
204.3
-
4.8
4.8
7.6
16.4
20.1
19.6
20.0
14.2
2.7
0.4
16.5
22.9
-8.4
-
39.5
41.6
54.8
78.3
105.9
130.4
159.0
202.5
231.3
213.0
292.9
363.1
400.1
-
16.5
16.7
21.9
30.9
41.6
52.7
66.7
79.1
88.7
82.4
113.7
142.5
141.9
153.2
20.2
21.0
28.0
34.2
48.4
63.0
78.7
98.0
113.2
97.5
127.2
157.1
178.7
205.0
-3.7
-4.3
-6.1
-3.3
-6.8
-10.3
-11.9
-18.9
-24.4
-15.1
-13.5
-14.6
-36.8
-51.8
Total
Volume
Net
Balance
Import
UNCTADstat Database
Export
Total
Volume
Net
Balance
Import
Export
China Statistical Yearbook
Total
Volume
Net
Balance
Import
Export
Year
ASEANstats Database
36.7
37.7
49.9
65.1
90.0
115.7
145.4
177.1
201.9
179.9
240.9
299.6
320.6
358.2
Studies have been undertaken to explain the discrepancy in the trade balance data of China and those
reported by its trade partner governments.
Three major causes of data discrepancy:*
◦ Hong Kong as trade entrepot: Upon transiting Hong Kong, export goods are added value due to
further processing or re-packing.
◦ Recording discrepancy: Chinese goods are recorded as exports to an intermediary country because it
is the last known destination by the exporters even if the goods are destined to a third country.
◦ Difference in valuation: Refers to differences in values declared by Chinese customs at time of
exportation and values declared to US customs at time of importation.
We use the UNCTADstat Trade Database.
*U.S. Department of Commerce, Office of the United States Trade Representative, and Ministry of Commerce, P.R. of China (2009).
“Report on the Statistical Discrepancy of Merchandise Trade between the United States and China,” Hangzhou, October.
ASEAN-China Bilateral Trade Relation
Growth in Volume of Sino-ASEAN Trade, 2000-2013 (In US$ Billions)
ASEAN’s Total Imports and Exports with Major Trade Partners, 2013 (In US$ Billions; shares in parenthesis)
Partner
country/region
2000
2005
2010
2013
ASEAN
Export
Import
Total Trade
98.2 (23%)
84.3 (22%)
182.5 (23%)
165.4 (25%)
154.3 (26%)
319.7 (25%)
263.0 (25%)
236.4 (25%)
499.4 (25%)
330.5 (26%)
288.0 (23%)
618.5 (25%)
China
Export
Import
Total Trade
16.5 ( 4%)
20.2 ( 5%)
36.7 ( 5%)
53.7 ( 8%)
63.0 (10%)
115.7 ( 9%)
113.7 (11%)
127.2 (13%)
240.9 (12%)
153.2 (12%)
205.0 (16%)
358.2 (14%)
EU
Export
Import
Total Trade
63.9 (15%)
41.9 (11%)
105.8 (13%)
84.2 (13%)
60.8 (10%)
145.0 (12%)
116.2 (11%)
89.1 ( 9%)
205.3 (10%)
128.5 (10%)
117.9 ( 9%)
246.4 (10%)
Japan
Export
Import
Total Trade
57.9 (14%)
74.0 (19%)
131.9 (16%)
73.1 (11%)
83.6 (14%)
156.7 (12%)
103.2 (10%)
115.8 (12%)
219.0 (11%)
122.9 (10%)
113.1 ( 9%)
236.0 ( 9%)
US
Export
Import
Total Trade
80.9 (19%)
51.9 (14%)
132.8 (16%)
94.3 (14%)
61.1 (10%)
155.4 (12%)
100.6 (10%)
82.2 ( 9%)
182.8 ( 9%)
115.1 ( 9%)
90.7 ( 7%)
205.8 ( 8%)
World
Export
Import
Total Trade
426.8 (100%)
380.0 (100%)
806.8 (100%)
654.5 (100%)
602.7 (100%)
1,257.3 (100%)
1,052.4 (100%)
952.9 (100%)
2,005.3 (100%)
1,269.6 (100%)
1,244.9 (100%)
2,514.5 (100%)
Composition of ASEAN Exports to and Imports from China, 2013 (shares in percent)
Primary commodities
All food items
Agricultural raw materials
Ores and metals
Fuels
ASEAN Exports ASEAN Imports
to China
from China
41.2
11.6
9.2
3.4
8.3
0.6
6.5
2.6
17.2
4.9
Manufactured goods
Parts and components for electrical and electronic goods
Electronic excluding parts and components
Chemical products
Other manufactured goods
General industrial machinery, metalworking and powergenerating machinery and transport equipment
58.6
Pearls, precious stones and non-monetary gold
0.2
0.001
100.0
100.0
Total
88.3
22.8
4.6
14.5
10.2
6.5
23.4
7.6
9.3
27.0
21.0
The diversity among ASEAN economies leads to diverse trade performance with China.
ASEAN Member Country Trade with China, 2003, 2013 (In US$ Billions)
Country
Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Viet Nam
Total
ASEAN
Trade
Volume
0.3
0.3
7.4
0.07
14.1
0.8
4.1
21.2
11.8
5.0
65.1
2003
Share of
ASEAN
Trade
0.5%
0.5%
11.4%
0.1%
21.6%
1.3%
6.3%
32.6%
18.1%
7.7%
100.0%
2013
Rank
8
9
4
10
2
7
6
1
3
5
Trade
Volume
Share of
ASEAN Trade
0.5
3.2
54.3
1.2
64.6
4.2
15.1
92.3
65.0
57.8
0.1%
0.9%
15.2%
0.3%
18.0%
1.2%
4.2%
25.8%
18.1%
16.1%
358.2
100.0%
Rank
10
8
5
9
3
7
6
1
2
4
ASEAN Countries Export-Import Ratio relative to China, 2000-2013
ASEAN and China: Competition in the
World Market
There is, of course, a China-threat.
Comparing the trend of ASEAN’s and China’s share of US, EU and Japanese imports on specific
product lines reveals (2000 vs. 2013 figures):
◦ Electronic goods (excluding parts and components)
◦ ASEAN has a 24.3% share of US imports which fell to 9.3% while China’s share rose from 16.6% to 57.9%.
◦ ASEAN has a 35.0% share of Japanese imports which fell to 18.3% while China’s share rose from 13.7% to 72.0%.
◦ Textile fibres, yarn, fabrics and clothings.
◦ ASEAN’s share has actually improved but China’s share has improved even greater.
◦ ASEAN’s share of US imports rose from 12.9% to 18.7% while China’s share rose from 13.0% to 38.8%.
◦ ASEAN’s share of Japanese imports rose from 8.1% to 15.5% while China’s share rose from 66.2% to 70.5%.
◦ ASEAN’s share of EU imports was maintained at 5.2% while China’s share rose from 7.7% to 22.2%.
Balassa (1965) introduced the revealed comparative advantage (RCA) index to measure a
country’s export performance vis-a-vis a set of countries for a specific commodity or industry.
◦ The comparative advantage is ‘revealed’ through the observed patterns of trade, instead of using
autarky prices which theories are generally unobservable.
The RCA index is computed as:
 =
 
 
=
 
 
where  refers to exports,  is a country,  is a set of countries,  is a commodity or
industry, and  is a set of commodities or industries.
RCA Index on Manufactured Goods based on Degree of Manufacturing, 2013
ASEAN Countries (less Brunei, Laos, and Myanmar) and China
Manufactured goods
China Cambodia Indonesia Malaysia Philippines Singapore
Thailand
Viet Nam
Labor-intensive and
resource-intensive
manufactures
1.76
6.67
2.82
0.77
0.98
0.14
0.70
3.53
Low-skill and technologyintensive manufactures
1.07
0.43
0.81
0.50
0.44
0.45
0.76
0.73
Medium-skill and
technology-intensive
manufactures
0.71
0.08
0.73
0.57
0.74
0.58
1.17
0.41
High-skill and technologyintensive manufactures
0.98
0.07
0.68
1.56
1.36
1.77
1.02
0.74
Building Trade Reciprocity through an
Integrated Supply and Production Chain
China is driving a new round of integration in regional production as it structurally shifts from
export-oriented to consumption-driven economy.
China to rationally outsource or offshore production to cheaper locations either inland or to
neighboring countries
◦ Some manufacturing shifted inland with firms: Unilever Plc, Samsung Electronics Co. Ltd., and Dell, Inc.
◦ Some are increasingly relocating to ASEAN: US$ 3.2 billion Samsung mobile plant erected in Thai
Nguyen in Viet Nam, Indonesia expecting major investment boost from Foxconn Technology Group
Nearly a third of textile and garments manufacturers have moved all or part of production
outside China.
◦ Zhongshan Liancheng Co. relocated operations to Cambodia at a quarter of labor costs
Push Factors for China-based firms to relocate to ASEAN:
Labor Costs of Selected Chinese and ASEAN Cities
City
Average Worker
Mandatory
Salary (US$, per
Welfare (% of
calendar month)
salary)
Corporate Tax Rates in China and Selected ASEAN Countries
Guangzhou,
China
Bangkok,
Thailand
Ho Chi Minh City,
Viet Nam
760
41%
China
460
5%
150
Jakarta,
Indonesia
Kuala Lumpur,
Malaysia
Manila,
Philippines
Country
Corporate Income
Tax (CIT) Rate
25%
Dividend Tax
Imposed
10%
Thailand
20%
10%
22%
Viet Nam
22%
0%
240
4.8%
Indonesia
25%
20%
800
12%
Malaysia
25%
0%
500
25%
Philippines
30%
15%
Source: Devonshire-Ellis, Chris (2014a). “China’s Agreement with ASEAN – What it Means for China-Based Foreign Manufacturers”, China Briefing. Available at
briefing.com/news/2014/02/27/chinas-agreement-with-asean-what-it-means-for-china-based-foreign-manufacturers.html
http://www.china-
Pull factors for China-based firms to relocate to ASEAN:
◦
◦
◦
◦
◦
ACFTA and the ASEAN trade bloc
Abundant commodities and resources
Relatively low cost
Growth in consumption with relatively young population demographics
Production gap between China and ASEAN likely to decrease as regional infrastructure improves
China Plus One Framework: companies maintain bulk of operations in China but shift
additional manufacturing to another country (e.g. Volkswagen).
As China moves away from low-value added manufacturing, it will benefit developing, lowincome ASEAN countries.
How about major ASEAN countries involved with high-value manufactures?
◦ Increasing volume of trade in parts and components (intermediate inputs) highlights another aspect
of the regional integration.
◦ Roughly 40% of manufactures exported by ASEAN to China comprised of electrical and electronic
parts and components, while a quarter of the same manufactures are exported by China to ASEAN.
Conclusion
Diversity among ASEAN economies leads to uneven relations between each country with China.
ASEAN, as a whole, benefits from its relation with China primarily since China offers itself as a huge
market for ASEAN products. China has become ASEAN’s second largest trading partner.
The two regions are becoming more engaged, highlighted by the slow but sure emergence of an
integrated regional supply chain.
Low-income ASEAN economies are benefitting in the shift of low-value manufacturing industries into
their countries. The rest see a threat as China takes over production of high-value manufactures.
Strengthening the trade in parts and components is a way to improve trade complementarities.
Dealing with the realities of an advancing ASEAN-China economic integration means each country
enhances its competitive advantages, finds a niche in the regional production chain, and manages
the competition with its neighbor.
Thank you.
K EVIN C . C HUA, PH.D.
KC H UA @ S D U. E D U.C N
RO NALD U. ME NDOZA, P H . D.
[email protected]
MONICA M. MELCHOR
[email protected]
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