Export Competitiveness of China and ASEAN in the U.S. Market

Abstract

This article provides a comparison of the changing patterns of export share, product mix, industry structure and export growth among China and ASEAN-4 (Indonesia, Malaysia, Singapore and Thailand) as exporters of primary commodities, labour-intensive goods as well as capital-intensive manufactures to their common U.S. import market. The degree of export rivalry or competition among China and ASEAN-4 in the US. market is examined by using a conventional shift-share methodology. Changes in ASEAN-China's relative real exchange rate, export composition, as well as changes in their trade patterns, insofar as they might have effects on the export shares of the ASEAN-4 and China to the United States, are considered. The study points unequivocally to some rivalry effects from China on the ASEAN4's exports to the United States. Some of the possible approaches to attaining a propitious outcome of the competition, and ways to ameliorate adverse effects of the rivalry are raised and discussed. Introduction China and ASEAN (Association of Southeast Asian Nations)' have experienced strong economic growth over the last two decades or so. The dynamic growth of these economies are attributed, inter alia, to their successful reforms, industrial restructuring and export-led industrializations. Aside from sharing similar rates of growth, there are some other common features between China and the ASEAN countries. For example, in their initial stages of growth, China and ASEAN were predominantly specializing in the production of primary-based and labour-intensive commodities (for example crude minerals, textiles, and clothing), in contrast to the newly-industrialized economies' (NIEs) and Japan's production of largely capital- and technology-intensive products.2 Another similarity is that both China and the ASEAN countries are heavily dependent on the United States and Japan as important destinations for their exports. By exporting similar products (for example labour-intensive goods) to the same markets, these economies tend to face a high degree of export competition or rivalry among themselves. This article aims to provide a comparison of the changing pattern of export competitiveness among China and the four ASEAN countries comprising Indonesia, Malaysia, Singapore and Thailand (hereafter ASEAN-4) as exporters of primary commodities, labour-intensive goods as well as technology-intensive manufactures in the U.S. market. Competitiveness is defined as country A's ability to gain market share on a common export destination (such as the U.S. import market).3 There are many possible factors contributing to the changing level of competitiveness of a trading country. In this article, we confine our analysis to evaluating how important relative changes in real exchange rate, product composition, industry structure and growth rates are in influencing export competitiveness of China and ASEAN-4 in the U.S. import market. The degree of export rivalry among China and ASEAN-4 is examined by using a shift-share model (see, for example, Herschede 1991). In particular, the model assesses the effects of different industry structures and growth rates on the export performance of China and each of the four ASEAN countries in the U.S. market. This article is organized as follows. In the next section, the changing trends and patterns of China and the ASEAN-4's total (primary and manufactured) exports to their major trading partners, namely the United States and Japan, are examined. We then confine our subsequent analysis to the case of the United States as ASEAN and China's common export destination. Issues of changes in real exchange rate and product composition, insofar as they might have effects on the ASEAN-4 and China's export growth rates and on their market share in the U.S. import market, are considered in the article. The shift-share methodology is presented in the following section for assessing and comparing the differences in competitiveness among China and the ASEAN countries in the U. …