China#39;s Trade Acceleration and the Deepening of an East Asian Regional Production Network.pdfVIP

66 China World Economy / 66 81, Vol. 16, No. 1, 2008 China s Trade Acceleration and the Deepening of an East Asian Regional Production Network Sarah Y. Tong, Yi Zheng * Abstract China ’s recent surge in trade has been associated with its deep ening but contrasting trade relations with its two g roup s of key trading p artners. On the one hand, China ’s trade surp luses with the USA and the E U have risen rapidly, reaching US$144bn and US$91bn in 2006, resp ectively. On the other hand, China is impo rting heavilyf rom its Asian neighbors. This diverging pa ttern of trade relations between China and its main trad ing p artners refl ects the continuous expa nsion and intensifi cation of a comp lex cross-borderp roduction network in Asia, pa rticularly f or consumer electronics. I n the p rocess of deepening manuf acturing sharing, China serves as an essential exportp latf ormf orf irms headquartered in the more advanced economies. Thesefi rms expo rt intermediate goodsf rom the relatively more advanced Asian economies to their aff iliates in China where these inp uts are assembled and then shippe d to key export markets, including p rimarily the USA and the E U. One appa ren t outcome of the g rowing p rocessing and assembly trad e is the increased interdep endency among Asian economies, which are now more dep endent on each other than ever. It has also led to substantial structural changes and technological upgrading in China ’s traded goods. Keywords: trade, trade relations, trade imbalances JEL codes: G11, G15, G18 I. China s Recent Surge in Trade China ’s rapid emergence as a global trading power in recent years has attracted increasing * Sarah Y. Tong, Assistant Professor, D epartment of Economics; Research Fellow, East Asian Institu te, N ational University of Singapore, Singapore. Email: ecstyt@nu .sg; Yi Zheng, Research Officer, East Asian Institute, N ational University of Singapore, Singapore. Email: eaizy @nu .sg. 2008 The A