ABSTRACT
Ever since the Peoples’ Republic of China (henceforth China) began to emerge as a major trading nation in the late 1980s, there has been a growing concern in policy circles in other countries in East Asia that competition from China could crowdout their export opportunities. This concern has figured much more prominently in economic policy debated in countries in Southeast Asia than elsewhere in the region, because of the apparent similarities in export compositions of these countries and that of China. Initially, the ‘China fear’ in the region was mainly related to export competition in the standard light manufactured goods (clothing, footwear, sport goods, etc.), but soon it turned out to be pervasive as China began to rapidly integrate into global production networks in electrical and electronics products through an unprecedented increase in foreign direct investment in these industries. Rapid increase in China’s share in world exports markets in these product lines, coupled with some anecdotal evidence of MNEs operating ASEAN countries relocating to China, have led to serious concern about possible erosion of the role of ASEAN countries in global production networks. 1 These concerns have gained added impetus from China’s recent accession to the WTO, which not only provided China with most-favoured nation (MFN) status in major markets but also enhanced China’s attractiveness to export-oriented investment by reducing the country risk of investment.
