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The Rise of China and East Asian Export Performance: Is the Crowding-Out Fear Warranted?

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  • The revised version of a paper presented at the conference on Reforms for Korea's Sustained Growth organised by the East-West Centre and Korea Development Institute, Honolulu, 12–13 July 2007. I am grateful to Sanghhoon Ahn, JunTaik Hyun, Anne Krueger, Jungho Yoo and other conference participants, and to Max Corden, Satish Chand, Sisira Jayasuriya, Henryk Kierzkowski and Rod Tyers for their valuable comments. Nobuaki Yamashita provided invaluable research assistance. Comments and suggestions by the two anonymous referees are gratefully acknowledged.

Abstract

This paper examines how China's emergence as a major trading nation is affecting export performance of its East Asian neighbours. Following a stage-setting overview of trends and patterns of China's export performance, it probes China competition in third country markets and emerging patterns of imports. The East Asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China's rapid market penetration in traditional labour-intensive manufactured goods has occurred mostly at the expense of the high-wage East Asian countries, without crowding-out the export opportunities of low-wage countries in the region. More importantly, China's rapid integration into global production networks as a major assembly centre has created new opportunities for the other East Asian countries to engage in various segments of the value chain in line with their comparative advantage.

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