The double edges of growing exports to China

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OCTOBER 31, 2019 - 4:28 PM

THE surge in exports to China from the emerging economies of Cambodia, Laos, Myanmar and Vietnam has benefited their development, but it also makes them more vulnerable to "future Chinese economic coercion", according to a regional studies expert.

Dr Malcolm Cook, a senior fellow at Singapore's ISEAS-Yusof Ishak Institute, said while China is an increasingly important export market and trading partner for all 10 Asean economies, the composition of this growing China trade is distinctly different for the region’s six wealthier, more globally integrated economies and the poorer, emerging economies of Cambodia, Laos, Myanmar and Vietnam.

Not only did the exports to China from these four mainland Southeast Asian economies boom, they were the only four economies in Southeast Asia that saw the growth rate of exports to China outpace the growth rate of imports from China from 2013 to 2018.

However, during a period of heightened political and security tensions between Vietnam and China in 2014, Vietnamese lychee exporters suffered a sharp drop-off in sales to China, the dominant export market for Vietnamese lychees, Dr Cook wrote in a report for ISEAS Perspective.

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"For Indonesia and the Philippines in particular, the growing trade deficits with China can become a political problem when, as with the current Jokowi and Duterte administrations, incumbent administrations are labelled by their opponents as being too permissive of greater Chinese influence in their respective countries," he added.

On the whole, he noted that from 2013 to 2018, China’s share of exports increased for each of the ten South-east Asian economies, while its share of imports increased for eight out of 10. Only Vietnam and Laos saw China’s share drop.

Over the same period, the importance of the United States as a trading partner for South-east Asian economies is also growing and is not being displaced by China. He noted that the share of exports to the US increased for each of the 10 Asean economies, and the US is the top export market for Cambodia, the Philippines and Vietnam, while share of imports increased for six Asean countries, particularly for Cambodia.

"Increasingly frequent and loud assertions about the relative decline of the USA and the displacement of the USA by China in Southeast Asia are wrong in relation to trade flows," Dr Cook said.

Dr Cook concluded that the growing importance of China as a trading partner and export for Asean economies is good for each economy and the region as a whole, especially at a time when the US is also gaining ground in this region.