People’s Republic of China’s Export Threat to ASEAN: Competition in the US and Japanese Markets

Abstract

The issue of People’s Republic of China’s (henceforth PRC) competitive threat to ASEAN and other regional exporters has received considerable attention in the aftermath of PRC’s WTO accession. Most modeling exercises available at present tend to suggest that welfare losses in the region will be relatively slight since all exporters will gain from the expansion of world trade and the rise in imports into the Chinese market (Ianchovina and Martin, 2001). However this does not mean that there will be no market disruption in the short-term to exporters in some sectors and some countries as a result of increased Chinese competition. This paper considers the issue of competition by looking at trends in imports into the two of the main markets of the world economy – United State and Japan. It addresses the question - in what sectors was ASEAN losing competitiveness to PRC prior to the WTO accession and explores the economic characteristics of these sectors. The period of study is the second half of the 1990’s when competition from PRC intensified in a range of products. The analysis is conducted both for the main ASEAN exporters as a group and then moves to consider individual economies. We focus on the larger ASEAN economies – Singapore, Malaysia, Thailand, Indonesia and the Philippines and exclude the smaller exporters such as Viet nam and Cambodia. The importance of the US and Japanese markets for these economies and PRC can be seen in table 1. The paper is in four main sections. Section 1 sets out a methodology for assessing the competitiveness effect for ASEAN from PRC based on changing relative market shares. It also gives the descriptive results from the application of this approach. Section 2 sets out a regression model, which attempts to explain this competitiveness effect by characteristics of different export categories. Section 3 gives the results of this regression analysis. We conclude with some final observations.