Dependence and competition: trade relationship between Asian countries and China

ABSTRACT This study examines two aspects of trade, dependence and competition, between China and Asian countries. The study first outlines China’s evolution from a small trading nation that is highly dependent on the Soviet Union to the world’s largest trading nation with a diversified trade structure. After being dependent on the Soviet Union during the 1950s, China was dependent on Japan in terms of trade from the 1970s to the 1990s. However, during the first two decades of the 21st century, the relationship between the two countries completely changed. This study further examines bilateral trade relationships of South Korea, Taiwan, Vietnam, Malaysia, Singapore, the Philippines, Indonesia, vis-à-vis China. The study shows that Asian countries have become increasingly dependent on China in terms of trade, at the expense of trade with their conventional partners, namely Japan and the United States. Intra-ASEAN trade is also eclipsed by the growth of trade with China. Additionally, the study reveals, competition in export markets between China and Asian countries has intensified. The high-income countries in Asia have been caught up by China, while the low-income countries are also facing increasing competitive pressure from China.