China : its impact on the developing Asian economies

Abstract

The rapid growth of East Asia, with China at its centre, has attracted global attention. Many authors have emphasised the emergence of regional production systems and the spread of high rates of growth across a large number of Asian economies. Nevertheless, the East Asian regional production system has not benefited all countries in the region equally. The more advanced Asian economies (Hong Kong, Singapore, South Korea and Taiwan) and the ASEAN-4 economies (Malaysia, Indonesia, Thailand and the Philippines) have a very different economic relationship in China compared with the poorer countries of the Greater Mekong Subregion (Cambodia, Laos, Myanmar and Vietnam). While the former have benefited from complementarities with China, supplying parts and components to largely export-oriented assembly plants, the latter are selling raw materials and resource-based products to China. China’s growth offers many opportunities for other Asian countries to accelerate their growth. Making use of these opportunities for purposes of income generation of poor people requires prioritising two policy areas. The first is connectivity. Some parts of Asia remain poorly connected to this regional production system. Better infrastructure and better trade links are key to enhancing the growth and incomes in these parts of Asia. The second priority is enhancing sustainability. The poorer Asian countries have increased exports to China, but much of this resource-based export growth is unsustainable. Sustaining and increasing trade between China and these countries has the potential to be more effective than increasing aid for the pursuit of poverty reduction and improved welfare in the poorer countries of the region. However, these countries will only benefit from the dynamism of the East Asian regional economy if policy initiatives directly address the issue of sustainability of resource extraction. These initiatives need to be taken not only in the exporting countries, but also in China itself. Keywords: regional integration; value chains; East Asia; economic development.