Impact of A Rising Chinese Economy and ASEAN's Responses

The emergence of China as one of the largest trading nation provides challenges and opportunities to its neighboring ASEAN countries. In the face of the rise of China, there were concerns that ASEAN economies may be adversely affected. One of the concerns is that the world export markets of labor intensive goods will be threatened if China turns into the world low cost manufacturing workshop. Meanwhile, trade between China and ASEAN countries increased dramatically during the past decade. Not surprisingly, China’s accession to WTO and the future establishment of a Free Trade Area (FTA) between ASEAN and China will further change the trade relations between the two areas. The paper analyses the past trade patterns between China and ASEAN countries and find out the impact of the FTA on ASEAN countries, in particular, the impacts to specific industries in each individual country. Secondly, the paper also examines the ever increasing role of foreign direct investment between the two regions and finally, it analyzes the possible policy responses of the ASEAN countries and consequences of these policies.