Structural Shift in Türkiye-East Asia Economic Relations: The Demise of Japan and the Rise of China and South Korea

Abstract

Türkiye’s economic relations with East Asia have gone through a significant structural shift over the last two decades. Previously, Japan dominated Türkiye’s trade with East Asia and foreign direct investment inflows from East Asia to Türkiye. However, recently both South Korea and China have surpassed Japan as major trading partners of Türkiye in East Asia and caught up with Japan in foreign investments in Türkiye. The dependence of the Turkish economy on intermediate inputs from China, in particular, rose remarkably. The shift from Japan toward South Korea, and more significantly, to China in Türkiye’s economic relations with East Asia reflects the changing division of labor in the East Asian region and the rise of China as a manufacturing superpower. In this analysis, we discuss the extent of this shift in Türkiye’s relations in light of the ongoing talks of a proposed free trade agreement between Türkiye and Japan, the changing global trade environment due to the decoupling from China, and the increasing fragmentation of the world economy.