context: PRC exports to ASEAN rose by 18.6 percent y-o-y in Q1 2023, accounting for 16.9 percent of the PRC's total exports. ASEAN is now the PRC's largest trading partner, surpassing both the US and the EU. Despite this, concerns regarding ASEAN eventually replacing the PRC as a leading manufacturing hub are growing. By delving into the specifics of PRC–ASEAN trade, such as areas of competition and complementarity, insights may be gained into both parties' future priorities and strategies.
Zhong Zhengsheng 钟正生 Ping’an Securities chief economist and Li Xiaojian 李枭剑 Ping’an Securities analyst shared their insights on PRC–ASEAN trade, noting that both sides have a mix of competition and complementarity in the export market across different sectors. Although competition has intensified in recent years, their complementarity is also highly significant. The two economists point out some characteristics of the bilateral trading relationship:
- competition
- the two sides obviously compete in labour-intensive product exports (e.g. clothing, furniture, shoes)
- complementarity
- the two have strong complementarity in electromechanical products
- ASEAN depends on China for manufacturing equipment, such as power machinery, metalworking machinery and general machinery
- the two have strong complementarity in electromechanical products
- dependence
- the PRC is dependent on ASEAN's raw materials
- it imports large quantities of nickel ore (for the new energy industry), mineral products, plastics, rubber products, oils and fats from ASEAN.
- the PRC is dependent on ASEAN's raw materials
Drawing on South Korea's experience, Li and Zhong suggest a set of policy measures aimed at enhancing the competitiveness of the PRC's manufacturing industry and safeguarding its market share:
- promote the synergy between the service industry and advanced manufacturing industries
- the PRC lags behind in high-end services, such as research and development, design, information services, financial services and vocational training services, which restricts the development and scaling-up of high-end manufacturing industries
- expand support for industries with advantages and build industrial clusters
- agglomeration and clustering effects play a strong role in furthering advanced manufacturing industries
- the PRC has already developed industrial clusters in Shanghai, Shenzhen, Wuxi and Dongguan, but their level of concentration should be raised
- the PRC should expand and strengthen its industries that have advantages and groom a group of enterprises to play a leading role
- promote trade using government policy
- PRC industries need to be upgraded as its low-end industries are moving abroad
- to alleviate the downward pressure on PRC exports and buy time to transform and upgrade the export sector, policies stabilising foreign trade should be introduced, including
- export support measures
- joining high-standard trade agreements
- kickstarting ‘landmark foreign investment projects’
- expanding market access for imports.