VERTICAL INTRA-INDUSTRY TRADE BETWEEN ASEAN-5 AND CHINA IN SITC 8

It is noticeable that international production fragmentation which give rise to vertical intra-industry trade (VIIT) has became increasing important in Asian region. Endowed with abundant labour and huge domestic market, China has emerged as the major assembly centre. As such, ASEAN-5 and China have been aggressively engaged in VIIT in manufacturing goods. This study aims to identify the niches for each ASEAN-5 member in miscellaneous manufacturing sector (SITC 8) which accounted for most of the traditional labour-intensive manufacturing products. This study analyzes the VIIT between ASEAN-5 members and China in SITC 8 at four-digit level from 1993 to 2009. The decomposition-type threshold method is employed in this study. The decomposition analysis has identified the consistent highvalue vertical intra-industry (HVIIT) products for each ASEAN-5 member. These products provide synergy in strengthening the bilateral VIIT between each ASEAN-5 member and China.