China's Rise And Its Impact On Asian Trade Flow

China became the third largest exporter in the world in 2004 and is expected to become the largest by the beginning of the next decade. The present study aims at investigating how this surge has altered the other Asian countries' specializations and has influenced regional integration. This paper tries to provide answers to the following questions:How has globalization provided new opportunities for latecomers to enter international trade through production sharing, which has been an especially widespread phenomenon in Asia? How has China taken advantage of the globalization process and assessed the consequences of its integration in Asian production networks on bilateral trade imbalances? Has China become an engine of trade in the region? How has the position of advanced Asian economies evolved: i.e. Japan and the Dragons (Hong Kong, Singapore, South Korea and Taiwan) in the division of labor, since China has become a global manufacturing base? Has China's trade expansion been achieved at the expense of ASEAN? What have been the effects of China's rise on ASEAN?The detailed analysis of trade flows during the period 1993-2003 shows that the rise of China has intensified the international segmentation of production processes among Asian partners, but has not created an autonomous engine for regional trade, which still depends on outside markets for final goods exports. The positions of advanced economies, the US and Japan, have been weakened in Asian trade, as the regionalization process has moved large volumes of production to low cost sites. As China has become an export platform for multinational firms, the driving force of Japan's trade has shifted from exporting final goods to North America and Europe towards exporting parts and components to China, and from importing final goods from America, Europe and the Dragons towards importing these goods from China. The Dragons' trade has also switched away from Japan and NAFTA and towards China. The reorganization of production has weakened trade between the advanced economies but up to now has not severely affected the position of the emerging ASEAN in international trade. But that's only a short-run result; in the long run, China would surely affect much on ASEAN. And how much the effect would be is determined by several complicated factors that is also fully discussed in this paper.The paper is organized in six sections. The first section is a brief introduction of the content. The second section lists China's achievements on trade and the reason why China has achieved such an outstanding trade performance in twenty years. The third section presents an overview of Asian trade. The fourth section focuses on changes that took place in the trade flows of Asian economies, as a result of the international reorganization of production and the rise of China's trade. The fifth section addresses the trade relationship between China and ASEAN, as well as the present trade situations and prospect on ASEAN under pressure of China's rise. And the last section gives a brief statement on how China should do facing such a regional situation and the conclusion we can draw from the analysis.