Can Trade with the People’s Republic of China be an Engine of Growth for Developing Asia?

Abstract

The recession in the United States in the wake of the global financial crisis has dampened developing Asia’s exports and growth. As a result, developing Asia is looking increasingly to the People’s Republic of China (PRC) as a source of demand and growth. This paper empirically assesses the PRC’s potential an engine of growth for developing Asia. The most significant finding is that the share of final goods in the PRC’s imports from East and Southeast Asia has been growing while the share of parts and components has been shrinking, suggesting that the PRC is becoming more of a consumer and less of an assembler. This provides some grounds for optimism about the prospects of trade with the PRC as a source of resilience against extra-regional demand shocks in the short run and an additional source of growth in the long run.