Emerging China and Its Interaction with ASEAN Economies

Abstract

The emerging of China as the largest trader, second largest economy, and the third largest outward direct investor of the world definitely has a great impact on all Asian economies during the past decades. This chapter will first examine the role of China in terms of its regional economic growth and its spillover effect through the analysis on the pattern and co-movement of many macroeconomic measures.

The chapter would then like to highlight China’s integration with Asian economies within the global production network via the evolution of the sophistication and value added of merchandise trade. Their integration is also closely connected to China’s rising direct investment and commercial service providing, mainly, construction contracts, to these economies. The authors believe that the free trade agreement between China and Asian economies and the liquidity swap agreement between Renminbi and their currencies will ensure this region to become one of the most active economic zones around the world.