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China and Intra-Asian Trade

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“China is a much richer country than any part of Europe.” This was written by Adam Smith in his 1776 book The Wealth of Nations. Most people are not aware that as early as the ninth century, trade between Chinese, Indians, Japanese, Siamese (today’s Thais), Javanese (today’s Indonesians), and Arabs were much greater than those within Europe. There are records of Philippine-Sino trade during the period—for example, Chinese silks and porcelain were traded for Philippine carabao horn, gold, and spices.

For two centuries until just three decades ago, China was a sleeping tiger, as described by Napoleon Bonaparte. During this time, the world saw the rise of Western civilization and became exposed to a Western ethnocentric view, which equated progress and development with Western culture and values.

China is regaining the glorious past it experienced before 1800. The global economy looks to China as the powerful engine of growth. Like its history before the 19th century when external trade was extensive, China now trades with 220 countries and regions in the world. Its annual export and import trade volume totaled over one trillion US dollars, increasing over 30% each year in the last decade.

China would also like to regain the vibrant economic ties it had with other Asian countries in the past. In recent decades, trade relations between China and many Asian countries have been increasing in their complementarities. Primary resources such as the petroleum, rubber, copper, and nickel of Southeast Asia are very essential to China’s industrialization. On the other hand, consumers in the region are attracted to China’s cheap manufactured goods.

China’s search for fuels and metals has driven up the prices of such commodities. This is a far cry from the situation three decades ago when petroleum constituted 80% of China’s total exports. Today, China secures these resources not just through trade but also through investment and official development assistance (ODA) projects.

The other important component of intra-Asian trade comes from the production networks within the region.

Trade complementarities are in the production process itself. Multinationals and the newly industrialized economies of East Asia provide capital and technology (machinery and equipment), while other countries in the region produce other components and parts. The workshop of this segmented production process is in labor-abundant China, where assembly of components and parts is being done. This phenomenon has changed the industrialization paradigm for the whole of East Asia.

Trade is not the only economic link between countries in the region. China naturally invests in mineral exploration projects in countries where such resources can be found. China enjoys a high level of investments from Hong Kong, Singapore, Taiwan, and other neighboring countries.

Financial cooperation is another important link among countries in the region. After the Asian Economic Crisis of 1997 and 1998, it became obvious and urgent to the region to be self-reliant and independent of Western countries by forging regional cooperation.

China and Japan, although not directly affected by the crisis, feared the repercussions the crisis might have on their economies. Presently, with the US economy declining and facing an imminent recession, it is timely for the region to focus on cooperation.

Aside from trade, investment, and finance, there are also other issues—social in nature, but with economic implications requiring economic solutions. Some examples are migration, health (Remember the SARS epidemic?), and the environment. These are not just national issues since they can only be adequately addressed regionally through cooperation.

 print ed: 08/08


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