Implications of China's globalization for ASEAN trade and economic growth

The impact of China's integration into the world market is likely to be experienced intensely by the labor-abundant ASEAN-4 because they occupy similar trade niches as China. Changes in ASEAN-4's patterns of trade and investment due to China's growth have impacts on these countries' human capital accumulation, the relative growth rates of which determine the economies' dynamic comparative advantage. Failure to accumulate human capital decreases the likelihood that the ASEAN-4 can sustain long-term high growth. To address this concern, this dissertation examines the impacts of China's integration into the world market on the ASEAN-4 economies.; Chapter One introduces the ASEAN and Chinese economies, comparing their economic conditions as well as their economic relations. Their trade has been increasingly concentrated in labor-intensive high-tech industries where they both have comparative advantage. Chapter Two constructs a model of trade in intermediate goods to capture changes in ASEAN-4's component trade and provides some implications for ASEAN-4's human capital accumulation. The model shows changes in ASEAN-4's pattern of component trade and in their demand for skilled labor due to China's growth. Depending on the range and quantity of intermediate goods produced, the economies might accumulate enough human capital to complement and grow with China, or lose human capital and become de-industrialized in the long term. In Chapter Three, we extend the basic model of component trade to capture externalities---economies of scale and scope, and industry linkages---and find the existence of multiple equilibria. Chapter Four presents an empirical study using the gravity model framework. The study focuses on the electrical and electronics industry, using product level data on bilateral trade between ASEAN-4 and their major trade partners. The results show that China's growth increases the scale of production in this industry. However, we find a negative impact due to competition with China in third markets. The results imply the need for government policies that help stimulate ASEAN-4's human capital accumulation in order to sustain their long-term comparative advantage. The results also imply benefits to ASEAN-4 from an ASEAN-China FTA, since this will increase their access to the China market.