ASEAN: China’s New Top Trading Partner in 2020
You may know already that in 2019 ASEAN had already become China’s 2nd largest trading partner, valuing the US $644 billion while overtaking the US amid the trade war. And seemingly the friction between China and the US is the reason why the former turned to others to fill the gap.
No wonder ASEAN has become China’s biggest trading partner in 2020 (first 3 months), surpassing EU alongside the US. Around this time, the ASEAN-China trade has increased by 6% to the US $140 billion (year-on-year). Additionally, China’s imports from Vietnam and Indonesia increased by 24% and 13%, in the respective years.
So, what has pushed ASEAN on the top of the trade?
Electronics including integrated circuits such as microprocessor chips, analog-to-digital converters, and chip capacitors have been a significant contributor with China importing US $ 14.9 billion worth of these circuits from the ASEAN countries.
Considering the increasing economic uncertainties by the US-China trade war, a lot of South Korean and Japanese companies have started transferring production to ASEAN including Malaysia, Thailand, and Vietnam, on being attracted by affordable wage structure, legal environment, and excellent infrastructure.
Having said that, it doesn’t mean that the entire industrial chain has moved to shift to ASEAN, rather it is just the extension of the chain in China. However, many of these factories still need equipment, a technology from China, raw materials, and expertise. Besides, many are dependent on Chinese consumers.
Will ASEAN be able to retain their position?
Analysts expect that the EU will get back to its top position as China’s biggest trading partner as the virus fades. Even if that is likely to happen China’s demand for mining products is expected to benefit ASEAN’s major producers like Malaysia, Laos, Indonesia, and Myanmar. Similarly, other sectors such as semiconductor and electronics industries, and the textiles and garment industry are ready to benefit from the resumption of China’s manufacturing.
It is believed post-pandemic; efforts could be seen for greater regional trade integration among ASEAN+ China, South Korea, and Japan economies to make these countries more resilient to economic volatility shocks. Also, this will be supported by the Regional Comprehensive Economic Partnership and Free Trade Agreement (FTA). The later is expected to link the ASEAN members and countries like Japan, South Korea, Australia, and New Zealand.
This will help in increase of the market access, opportunity to facilitate SMEs in ASEAN, and reduction in tariffs. Similarly, this will integrate the regional supply chain to make products from ASEAN even more competitive.
