Asean-China trade set to grow, with Vietnam tipped as major winner: Report

ASEAN-CHINA trade in goods is expected to "continue flourishing", while Vietnam is particularly well placed to benefit from changing investment patterns in the region, a recent report has said.

With China already leaning on South-east Asia for key commodities and electronics manufacturing, a recent trade deal is expected to boost merchandise trade with the region.

And Vietnam, whose bilateral trade with China has grown faster than its trade with all other Asean economies in the past two decades, is tipped to be a major winner, DBS economist Chua Han Teng projected in a report on Wednesday (Oct 20).

Noting that an expansion in Asean investments has fuelled imports from China and made the bloc China's biggest trade partner, Chua said that "we expect China-Asean economic ties to strengthen over the coming years, and goods trade is likely to flourish" on the back of the Regional Comprehensive Economic Partnership (RCEP) pact signed late last year.

Besides commodities such as petroleum, coal and agricultural products from Indonesia, Malaysia, Thailand and Vietnam, China taps Asean for electronics components. This is especially the case for Vietnam, which contributed 8.8 per cent of China's overall electronics imports in 2020, up from 0.4 per cent in 2010, the report noted.

On top of that, Vietnam has won market share from China in textile and footwear exports to the US, and seized part of Chinese electronics production as global supply chains relocated amid chilling US-China trade relations around 2018.

Asean's share of trade with the United States has picked up lately, a trend which the report attributed to trade diversion amid recent US-China tensions. But it highlighted that Vietnam is the only Asean economy to increase trade share with both the US and China since 2000.

Chua said that Vietnam can thus be expected to grow as "a key production base for finished goods to advanced economies, with inputs from China".