ASEAN-China trade relations and its impact on India

Abstract

China has been trying to make itself a paramount player in Asian production networks. It has indeed succeeded in its attempt by becoming an integral part of international processing activities. This is the primary reason for trade expansion of China. In 2015, China formed 63.5% of ASEAN’s total trade. It has grown rapidly, increasing from $192 billion in 2008 to $ 515 billion by 2018. China has also become a major part of the triangular trade where the size of China’s economy has played a major role in outweighing and displacing other Asian economies in exports to Western countries. Recently, a trade war with US has made China shift its distribution centres to Hong Kong from China and relocate its electronics production facilities to Taiwan so that products are not liable to tariffs by US. This opens up a great possibility for China to provide components to the countries that are actually exporting to US. China’s focus on BRI (Belt Road Initiative) will also increase because they don’t want to engage in a fight with US. With so much going on, ASEAN can be seen as a potential base for China. Currently, ASEAN is becoming major export manufacturing base for various countries. Due to its Free Trade Agreement (FTA) with China, it has begun to provide these opportunities to China as well. The integration of China with ASEAN is going on at proliferating pace. This can be seen from the rise in FDI inflow by 44% in a single year (2015-16) to $9.2 billion. They expect to increase the trade to one trillion dollars by 2020 starting from 2013. Physical connectivity is being improved to achieve this target.